It has been about a month since the last earnings report for TE Connectivity (
TEL Quick Quote TEL - Free Report) . Shares have added about 2.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TE Connectivity due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
TE Connectivity's Q1 Earnings & Revenues Beat Estimates
TE Connectivity 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. 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.
Adjusted earnings are projected at $1.57 per share. How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, TE Connectivity has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise TE Connectivity has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.