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TE Connectivity's (TEL) Q1 Earnings Beat, Sales Rise Y/Y
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TE Connectivity Ltd. (TEL - Free Report) reported first-quarter fiscal 2023 adjusted earnings of $1.53 per share, which surpassed the Zacks Consensus Estimate by 2%.
However, the figure decreased 13.1% from the year-ago fiscal quarter’s reading.
Net sales in the reported quarter were $3.84 billion, beating the consensus mark of $3.75 billion. The figure rose 1% on a reported basis and 8% organically from the respective year-ago fiscal quarter’s readings.
Well-performing transportation solutions drove the top line growth during the reported quarter.
TE Connectivity Ltd. Price, Consensus and EPS Surprise
Transportation Solutions: The segment generated $2.26 billion, which accounted for 58.8% of net sales. The figure grew 5% year over year. The company witnessed 9% growth in automotive sales, which was driven by the growing proliferation of electric vehicles and strong content trends in electronification.
However, sensor sales fell 4% from the year-ago quarter. Also, commercial transportation sales declined 5% year over year due to weak momentum in China.
Industrial Solutions: The segment generated $1.06 billion, which accounted for 27.6% of net sales. The figure rose 1% year over year. This was driven by improvements in commercial aerospace, which led to 9% growth in aerospace, defense and marine sales. Solid momentum across renewable applications also remained positive for the company’s energy business, which grew 1% year over year. Further, growing momentum across interventional procedures led to a 4% rise in medical sales.
However, industrial equipment sales, which declined 5%, were concerning.
Communications Solutions: The segment generated $522 million, which accounted for 13.6% of net sales. Further, the figure declined 14% year over year. This was attributed to broad market weakness. Data and device sales decreased 8% and appliance sales fell 23% year over year.
Operating Details
Per management, the gross profit was $1.2 billion, which was down 3.5% year over year. As a percentage of revenues, the figure contracted 130 basis points (bps) from the year-ago quarter to 30.9%.
We note that selling, general and administrative expenses were $392 million, which rose 8% year over year. Research and development expenses were $173 million, which declined 1.1% year over year.
The company’s adjusted operating margin was 16.2% in the reported quarter, which contracted 240 bps year over year.
Balance Sheet & Cash Flow
As of Dec 30, 2022, cash and cash equivalents were $793 million, down from $1.09 billion as of Sep 30, 2022.
Long-term debt was $3.4 billion in the fiscal first quarter, up from $3.3 billion in the prior fiscal quarter.
TE Connectivity generated $581 million in cash from operations in the reported quarter, down from $944 million in the previous quarter. Further, it generated a free cash flow of $399 million.
TEL returned $410 million to its shareholders.
Guidance
For second-quarter fiscal 2023, TE Connectivity expects net sales of $3.9 billion, with 3% decline on a reported basis and 2% growth on an organic basis from the year-ago fiscal quarter’s reading. The Zacks Consensus Estimate for the same is pegged at $3.92 billion.
Adjusted earnings are projected at $1.57 per share. The consensus mark is pegged at $1.60 per share.
Zacks Rank & Stocks to Consider
Currently, TE Connectivity carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer & Technology sector are Agilent Technologies (A - Free Report) , Arista Networks (ANET - Free Report) and Asure Software (ASUR - Free Report) . While Agilent Technologies sports a Zacks Rank #1 (Strong Buy), Arista Networks and Asure Software carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agilent has gained 10.5% in the past year. A’s long-term earnings growth rate is currently projected at 10%.
Arista Networks has lost 5.7% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Asure Software has gained 35.8% in the past year. The long-term earnings growth rate for ASUR is currently projected at 23%.
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TE Connectivity's (TEL) Q1 Earnings Beat, Sales Rise Y/Y
TE Connectivity Ltd. (TEL - Free Report) reported first-quarter fiscal 2023 adjusted earnings of $1.53 per share, which surpassed the Zacks Consensus Estimate by 2%.
However, the figure decreased 13.1% from the year-ago fiscal quarter’s reading.
Net sales in the reported quarter were $3.84 billion, beating the consensus mark of $3.75 billion. The figure rose 1% on a reported basis and 8% organically from the respective year-ago fiscal quarter’s readings.
Well-performing transportation solutions drove the top line growth during the reported quarter.
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 $2.26 billion, which accounted for 58.8% of net sales. The figure grew 5% year over year. The company witnessed 9% growth in automotive sales, which was driven by the growing proliferation of electric vehicles and strong content trends in electronification.
However, sensor sales fell 4% from the year-ago quarter. Also, commercial transportation sales declined 5% year over year due to weak momentum in China.
Industrial Solutions: The segment generated $1.06 billion, which accounted for 27.6% of net sales. The figure rose 1% year over year. This was driven by improvements in commercial aerospace, which led to 9% growth in aerospace, defense and marine sales. Solid momentum across renewable applications also remained positive for the company’s energy business, which grew 1% year over year. Further, growing momentum across interventional procedures led to a 4% rise in medical sales.
However, industrial equipment sales, which declined 5%, were concerning.
Communications Solutions: The segment generated $522 million, which accounted for 13.6% of net sales. Further, the figure declined 14% year over year. This was attributed to broad market weakness. Data and device sales decreased 8% and appliance sales fell 23% year over year.
Operating Details
Per management, the gross profit was $1.2 billion, which was down 3.5% year over year. As a percentage of revenues, the figure contracted 130 basis points (bps) from the year-ago quarter to 30.9%.
We note that selling, general and administrative expenses were $392 million, which rose 8% year over year. Research and development expenses were $173 million, which declined 1.1% year over year.
The company’s adjusted operating margin was 16.2% in the reported quarter, which contracted 240 bps year over year.
Balance Sheet & Cash Flow
As of Dec 30, 2022, cash and cash equivalents were $793 million, down from $1.09 billion as of Sep 30, 2022.
Long-term debt was $3.4 billion in the fiscal first quarter, up from $3.3 billion in the prior fiscal quarter.
TE Connectivity generated $581 million in cash from operations in the reported quarter, down from $944 million in the previous quarter. Further, it generated a free cash flow of $399 million.
TEL returned $410 million to its shareholders.
Guidance
For second-quarter fiscal 2023, TE Connectivity expects net sales of $3.9 billion, with 3% decline on a reported basis and 2% growth on an organic basis from the year-ago fiscal quarter’s reading. The Zacks Consensus Estimate for the same is pegged at $3.92 billion.
Adjusted earnings are projected at $1.57 per share. The consensus mark is pegged at $1.60 per share.
Zacks Rank & Stocks to Consider
Currently, TE Connectivity carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer & Technology sector are Agilent Technologies (A - Free Report) , Arista Networks (ANET - Free Report) and Asure Software (ASUR - Free Report) . While Agilent Technologies sports a Zacks Rank #1 (Strong Buy), Arista Networks and Asure Software carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agilent has gained 10.5% in the past year. A’s long-term earnings growth rate is currently projected at 10%.
Arista Networks has lost 5.7% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Asure Software has gained 35.8% in the past year. The long-term earnings growth rate for ASUR is currently projected at 23%.