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Why Is TE Connectivity (TEL) Down 7% Since Last Earnings Report?
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It has been about a month since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is TE Connectivity due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TEL Q2 Earnings Beat Estimates on Record Orders & Margin Gains
TE Connectivity delivered second-quarter fiscal 2026 adjusted earnings of $2.73 per share, up 23.5% from the year-ago quarter and beat the Zacks Consensus Estimate by 1.1%.
Net sales were $4.74 billion, up 14.5% year over year and beat the consensus mark by 0.9%. Top-line performance was supported by growth across both operating segments and solid execution. A key highlight was record orders of $5.3 billion, up 25% year over year, driving a book-to-bill of 1.12.
TEL Segment Growth Led by Industrial Momentum
Industrial Solutions generated fiscal second-quarter revenues of $2.32 billion, increasing 27% year over year on a reported basis and 17% organically. The quarter reflected broad-based strength, with Digital Data Networks delivering $714 million of sales and rising 48% year over year on a reported basis and 46% organically.
Within Industrial, Energy produced revenues of $445 million, up 60% reported and 11% organically, while Automation & Connected Living grew to $579 million, reflecting 13% reported growth and 8% organic growth. Aerospace, Defense and Marine increased to $408 million, and Medical revenues were $176 million, down modestly year over year.
Transportation Solutions posted fiscal second-quarter revenues of $2.42 billion, up 5% year over year on a reported basis, though organic sales declined 1%. Automotive revenues were $1.76 billion, increasing 2% reported but down 4% organically, with gains in Europe offset by market declines in North America and Asia.
Commercial Transportation stood out, with revenues of $433 million and year-over-year growth of 21% reported and 17% organically. Sensor revenues were $227 million, up 2% reported and down 3% organically, reflecting regional mix and end-market softness in parts of North America and Europe.
TE Connectivity Expanded Profitability on Execution
In second-quarter fiscal 2026, GAAP gross margin expanded 160 basis points (bps) year over year to 36.8%.
Selling, general, and administrative expenses, as a percentage of net sales, increased 30 bps to 11.3%. Research, development, and engineering expenses were up 10 bps to 5% of net sales.
On an adjusted basis, operating income was $1.03 billion, up 21.6% year over year. Adjusted operating margin expanded 130 bps year over year to 21.7%.
TEL’s Balance Sheet & Cash Flow
As of March 27, 2026, cash and cash equivalents were $1.11 billion with long-term debt of $5.55 billion as of March 27, 2026.
Cash generation remained a support point. Net cash provided by operating activities was $947 million in the quarter, and free cash flow was $680 million, up from $424 million a year ago.
TE Connectivity continued to return capital to shareholders, with $819 million spent on share repurchases and $417 million paid in dividends during the first half. The company also announced a 10% increase in its quarterly cash dividend.
TEL Q3 Outlook Calls for Double-Digit Gains
TE Connectivity expects third-quarter fiscal 2026 sales of approximately $5 billion, implying 10% reported growth and 9% organic growth year over year. Adjusted earnings are projected at approximately $2.83 per share, which indicates 17% year-over-year growth.
Management tied the outlook to ongoing orders momentum and its positioning in trends such as AI-related data demand, next-generation transportation, and electric grid modernization, while continuing to invest in new products and technologies to support customers globally.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a flat trend in estimates review.
VGM Scores
At this time, TE Connectivity has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the top 40% for value investors.
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.
Outlook
TE Connectivity has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is TE Connectivity (TEL) Down 7% Since Last Earnings Report?
It has been about a month since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is TE Connectivity due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TEL Q2 Earnings Beat Estimates on Record Orders & Margin Gains
TE Connectivity delivered second-quarter fiscal 2026 adjusted earnings of $2.73 per share, up 23.5% from the year-ago quarter and beat the Zacks Consensus Estimate by 1.1%.
Net sales were $4.74 billion, up 14.5% year over year and beat the consensus mark by 0.9%. Top-line performance was supported by growth across both operating segments and solid execution. A key highlight was record orders of $5.3 billion, up 25% year over year, driving a book-to-bill of 1.12.
TEL Segment Growth Led by Industrial Momentum
Industrial Solutions generated fiscal second-quarter revenues of $2.32 billion, increasing 27% year over year on a reported basis and 17% organically. The quarter reflected broad-based strength, with Digital Data Networks delivering $714 million of sales and rising 48% year over year on a reported basis and 46% organically.
Within Industrial, Energy produced revenues of $445 million, up 60% reported and 11% organically, while Automation & Connected Living grew to $579 million, reflecting 13% reported growth and 8% organic growth. Aerospace, Defense and Marine increased to $408 million, and Medical revenues were $176 million, down modestly year over year.
Transportation Solutions posted fiscal second-quarter revenues of $2.42 billion, up 5% year over year on a reported basis, though organic sales declined 1%. Automotive revenues were $1.76 billion, increasing 2% reported but down 4% organically, with gains in Europe offset by market declines in North America and Asia.
Commercial Transportation stood out, with revenues of $433 million and year-over-year growth of 21% reported and 17% organically. Sensor revenues were $227 million, up 2% reported and down 3% organically, reflecting regional mix and end-market softness in parts of North America and Europe.
TE Connectivity Expanded Profitability on Execution
In second-quarter fiscal 2026, GAAP gross margin expanded 160 basis points (bps) year over year to 36.8%.
Selling, general, and administrative expenses, as a percentage of net sales, increased 30 bps to 11.3%. Research, development, and engineering expenses were up 10 bps to 5% of net sales.
On an adjusted basis, operating income was $1.03 billion, up 21.6% year over year. Adjusted operating margin expanded 130 bps year over year to 21.7%.
TEL’s Balance Sheet & Cash Flow
As of March 27, 2026, cash and cash equivalents were $1.11 billion with long-term debt of $5.55 billion as of March 27, 2026.
Cash generation remained a support point. Net cash provided by operating activities was $947 million in the quarter, and free cash flow was $680 million, up from $424 million a year ago.
TE Connectivity continued to return capital to shareholders, with $819 million spent on share repurchases and $417 million paid in dividends during the first half. The company also announced a 10% increase in its quarterly cash dividend.
TEL Q3 Outlook Calls for Double-Digit Gains
TE Connectivity expects third-quarter fiscal 2026 sales of approximately $5 billion, implying 10% reported growth and 9% organic growth year over year. Adjusted earnings are projected at approximately $2.83 per share, which indicates 17% year-over-year growth.
Management tied the outlook to ongoing orders momentum and its positioning in trends such as AI-related data demand, next-generation transportation, and electric grid modernization, while continuing to invest in new products and technologies to support customers globally.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a flat trend in estimates review.
VGM Scores
At this time, TE Connectivity has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the top 40% for value investors.
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.
Outlook
TE Connectivity has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.