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TE Connectivity (TEL) Q3 Earnings & Sales Beat, Rise Y/Y

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TE Connectivity Ltd. (TEL - Free Report) reported third-quarter fiscal 2022 adjusted earnings of $1.86 per share, which surpassed the Zacks Consensus Estimate by 6.3%. The figure rose 4% year over year and 2.8%, sequentially.

Net sales in the reported quarter were $4.097 billion, which beat the consensus mark by 5.1%. The figure rose 7% on a reported basis and 11%, organically, from the respective year-ago quarter’s readings. It also increased 2.2%, sequentially.

Top-line growth was driven by the well-performing communications and industrial solutions of TEL.

TE Connectivity generated orders of $4.2 billion in the reported quarter, reflecting continued strong customer demand.

TE Connectivity Ltd. Price, Consensus and EPS Surprise

TE Connectivity Ltd. Price, Consensus and EPS Surprise

TE Connectivity Ltd. price-consensus-eps-surprise-chart | TE Connectivity Ltd. Quote

Top-Line Details

Transportation Solutions: The segment generated $2.3 billion, which accounted for 56% of net sales. The figure grew 2% year over year. TEL witnessed 2% growth in automotive sales, driven by the growing proliferation of electric vehicles. Further, commercial transportation sales grew 5% year over year, driven by a strong performance in North America and Europe. However, sensor sales fell 4% from the year-ago quarter’s level. Nevertheless, the solid momentum of sensors across factory automation applications was positive.

Industrial Solutions: The segment generated $1.13 billion, which accounted for 28% of net sales. The figure rose 13% year over year. This was driven by robust industrial equipment sales, which grew 27% from the prior-year quarter’s figure, owing to the growing capital investment in factory automation applications. Solid momentum across renewable applications remained positive for TEL’s energy business, which rose 11% year over year. Also, aerospace, defense and marine sales improved 4% owing to the market improvement in commercial aerospace. However, medical sales dipped 1% on a year-over-year basis.

Communications Solutions: The segment generated $663 million, which accounted for 16% of net sales. The figure rose 15% year over year. This was driven by solid content growth in high-speed cloud applications, which led to a year-over-year rise of 27% in data and devices sales. However, appliance sales fell 1% from the prior-year quarter’s reading due to a weak performance in China.

Operating Details

Per management, the gross profit was $1.33 billion, up 4.7% year over year. As a percentage of revenues, the figure contracted 100 basis points (bps) from the year-ago quarter’s level to 32%.

We note that selling, general and administrative expenses, and research and development expenses of $393 million and $179 million rose 7.4% and 6.5% year over year, respectively.

TE Connectivity’s adjusted operating margin was 18.6% in the reported quarter, which contracted 50 bps year over year.

Balance Sheet & Cash Flow

As of Jun 24, 2022, cash and cash equivalents were $820 million, up from $749 million as of Mar 25, 2022.

Long-term debt was $3.38 billion in the fiscal third quarter, down from $3.44 billion in the prior quarter.

TE Connectivity generated $579 million of cash from operations in the reported quarter compared with $413 million in the sequential quarter. Further, it generated a free cash flow of $423 million.

TEL returned $500 million to its shareholders.

Guidance

For fourth-quarter fiscal 2022, TE Connectivity expects net sales of $4.2 billion with 10% year-over-year growth on a reported basis and 15% on an organic basis. The Zacks Consensus Estimate for the same is pegged at $3.98 billion.

Adjusted earnings are projected at $1.85 per share, indicating a 9% rise from the year-ago fiscal quarter’s reported figure. The consensus mark is pegged at $1.80 per share.

Zacks Rank & Stocks to Consider

Currently, TE Connectivity carries a Zacks Rank #3 (Hold). Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology (AZPN - Free Report) , Keysight Technologies (KEYS - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aspen technology has returned 18.9% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.

Keysight Technologies has lost 26.8% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

Asure Software has lost 27.2% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.