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TE Connectivity (TEL) Up 5.6% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have added about 5.6% in that time frame, underperforming 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 drivers.
TE Connectivity Q4 Earnings Beat Estimates, Sales Fall Y/Y
TE Connectivity Ltd. reported fourth-quarter fiscal 2023 adjusted earnings of $1.78 per share, which surpassed the Zacks Consensus Estimate by 1.1%. However, the figure decreased 5.3% year over year.
Net sales in the reported quarter were $4.04 billion, which beat the consensus mark by 0.71%. The figure fell 7.4% on a reported basis and 1.4% organically from the respective year-ago fiscal quarter’s readings.
Orders were $3.9 billion in the reported quarter, with sequential growth in the Transportation and Communications segments.
Top-Line Details
Transportation solutions segment generated revenues of $2.41 billion, which accounted for 59.8% of net sales. The figure declined 1.4% year over year and lagged the Zacks Consensus Estimate by 0.54%.
The company witnessed 2% growth in automotive sales. Sensor sales were down 5% year over year, owing to solid momentum across automotive applications. Commercial transportation sales dropped 12.8% year over year.
Industrial solutions segment generated revenues of $1.16 billion, which accounted for 28.7% of net sales, and lagged the Zacks Consensus Estimate by 1.9%. The figure declined 6.8% year over year.
Industrial equipment sales declined 24.4% year over year, while Aerospace, defense and marine increased 3.2%. Energy and Medical increased 2.7% and 12.4%, respectively.
Communications solutions segment generated revenues of $463 million, which accounted for 11.5% of net sales. The figure declined 30.7% year over year but beat the consensus mark by 15.94%.
The year-over-year decline was attributed to broad market weakness. Data and device sales decreased 32.3% and appliance sales fell 27.7% year over year.
Operating Details
In fourth-quarter fiscal 2023, GAAP gross margin expanded 90 basis points (bps) year over year to 31.8%.
Selling, general and administrative expenses, as a percentage of revenues, increased 80 bps year over year to 10.2%. Research, development, and engineering expenses, as a percentage of revenues, increased 20 bps year over year to 4.3%.
GAAP operating margin expanded 60 bps year over year to 15.7%. Adjusted operating margin was flat year over year at 17.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Sep 29, 2023, cash and cash equivalents were $1.66 billion, up from $1.1 billion as of Jun 30, 2023.
Long-term debt was $3.529 billion as of Sep 29, 2023 compared with $3.915 billion as of Jun 30.
TE Connectivity generated $1.14 billion in cash from operations in the reported quarter, up from $779 million in the previous quarter.
TEL generated a free cash flow of $945 million in the reported quarter, up from $614 million reported in the previous quarter.
Guidance
For first-quarter fiscal 2024, TE Connectivity expects net sales of $3.85 billion, flat on both a reported and organic basis year over year.
Adjusted earnings are projected at $1.70 per share, up more than 10% year over year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, TE Connectivity has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. 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.
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TE Connectivity (TEL) Up 5.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have added about 5.6% in that time frame, underperforming 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 drivers.
TE Connectivity Q4 Earnings Beat Estimates, Sales Fall Y/Y
TE Connectivity Ltd. reported fourth-quarter fiscal 2023 adjusted earnings of $1.78 per share, which surpassed the Zacks Consensus Estimate by 1.1%. However, the figure decreased 5.3% year over year.
Net sales in the reported quarter were $4.04 billion, which beat the consensus mark by 0.71%. The figure fell 7.4% on a reported basis and 1.4% organically from the respective year-ago fiscal quarter’s readings.
Orders were $3.9 billion in the reported quarter, with sequential growth in the Transportation and Communications segments.
Top-Line Details
Transportation solutions segment generated revenues of $2.41 billion, which accounted for 59.8% of net sales. The figure declined 1.4% year over year and lagged the Zacks Consensus Estimate by 0.54%.
The company witnessed 2% growth in automotive sales. Sensor sales were down 5% year over year, owing to solid momentum across automotive applications. Commercial transportation sales dropped 12.8% year over year.
Industrial solutions segment generated revenues of $1.16 billion, which accounted for 28.7% of net sales, and lagged the Zacks Consensus Estimate by 1.9%. The figure declined 6.8% year over year.
Industrial equipment sales declined 24.4% year over year, while Aerospace, defense and marine increased 3.2%. Energy and Medical increased 2.7% and 12.4%, respectively.
Communications solutions segment generated revenues of $463 million, which accounted for 11.5% of net sales. The figure declined 30.7% year over year but beat the consensus mark by 15.94%.
The year-over-year decline was attributed to broad market weakness. Data and device sales decreased 32.3% and appliance sales fell 27.7% year over year.
Operating Details
In fourth-quarter fiscal 2023, GAAP gross margin expanded 90 basis points (bps) year over year to 31.8%.
Selling, general and administrative expenses, as a percentage of revenues, increased 80 bps year over year to 10.2%. Research, development, and engineering expenses, as a percentage of revenues, increased 20 bps year over year to 4.3%.
GAAP operating margin expanded 60 bps year over year to 15.7%. Adjusted operating margin was flat year over year at 17.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Sep 29, 2023, cash and cash equivalents were $1.66 billion, up from $1.1 billion as of Jun 30, 2023.
Long-term debt was $3.529 billion as of Sep 29, 2023 compared with $3.915 billion as of Jun 30.
TE Connectivity generated $1.14 billion in cash from operations in the reported quarter, up from $779 million in the previous quarter.
TEL generated a free cash flow of $945 million in the reported quarter, up from $614 million reported in the previous quarter.
Guidance
For first-quarter fiscal 2024, TE Connectivity expects net sales of $3.85 billion, flat on both a reported and organic basis year over year.
Adjusted earnings are projected at $1.70 per share, up more than 10% year over year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, TE Connectivity has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. 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.