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Why Is TE Connectivity (TEL) Down 3.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.
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.
TE Connectivity’s Q3 Earnings & Revenues Top Estimates
TE Connectivity Ltd. delivered third-quarter fiscal 2018 adjusted earnings of $1.43 per share, beating the Zacks Consensus Estimate by 6 cents. Notably, this marked the company’s 11th consecutive earnings beat. The figure also grew 15.3% year over year and steered past the projected range of $1.35-$1.37.
Continued solid execution of the company’s strategic plans resulted in impressive earnings.
Net sales in the quarter were up 12% year over year to $3.764 billion and also topped the Zacks Consensus Estimate of $3.684 million.
Solid segmental performance especially in the transportation and industrial segments drove top-line growth in the reported quarter. Additionally, organic growth in all the segments remained positive throughout the quarter.
The company received total orders of $3.7 billion excluding the company's SubCom business. The figure grew 9% organically from the year-ago quarter.
Top-Line in Detail
TE Connectivity operates in the following three organized segments.
Transportation Solutions: The company generated $2.112 billion of sales (56.2% of net sales) in the reported quarter, up 19.7% on a year-over-year basis. This was driven by solid organic growth of 12% within the segment’s businesses – automotive, commercial transportation and sensor. Further, orders also improved 8% organically. All these can primarily be attributed to robust performance in agriculture, mining, construction and heavy truck areas. Additionally, increasing design wins and strong presence in Americas, Europe and China drove the results.
Industrial Solutions: This segment yielded sales of $988 million (26.2% of net sales) witnessed another strong quarter, rising 9.2% from the prior-year quarter. The company experienced organic growth of 5% in the reported quarter. Further, the orders went up 12% organically. Strength in industrial equipment, Aerospace, Defense and Marine business drove impressive growth.
Communications Solutions: This segment generated sales of $664 million (17.6% of net sales), which decreased 4.7% year over year. This decline was primarily due to fall in SubCom revenues. However, the company maintained its strong momentum in appliances and data and devices businesses throughout the quarter. TE Connectivity witnessed 6% year over year organic growth within the segment. Moreover, by excluding the impact of SubCom, organic growth in orders received came to 8% from the year-ago quarter.
Operating Details
Per the company, the gross margin for the third quarter of fiscal 2018 came in 32.3%, which contracted 150 basis points (bps) from the year-ago quarter. Further, adjusted operating margin came in 16.7%, shriveling 10 bps year over year.
Margin contraction was primarily due to increasing research and development (R&D) activities. R&D expenses were $181 million which went up 7.7% from the prior-year quarter. Further, selling, general, and administrative expenses came in $409 million which increased slightly 0.2% year over year.
Balance Sheet & Cash Flow
As of Jun 29, 2018, TE Connectivity’s cash and cash equivalents of $770 million, greater than $559 million as of Mar 30, 2018.
The company generated free cash flow of $504 million in the reported quarter, up from $377 million in the prior quarter. Further, TE Connectivity paid back $382 million to its shareholders through the means of share repurchases and dividend payments.
Guidance
The company issued encouraging earnings and revenue guidance for the fiscal fourth quarter. It expects net sales in the range of $3.59-$3.69 billion, reflecting growth of 6% at mid-point.
Adjusted earnings per share are projected in the band of $1.31-$1.33, reflecting growth of 6% at mid-point.
Additionally, for fiscal 2018, TE Connectivity anticipates net sales of $14.58-$14.68 billion, reflecting growth of 12% year over year at the mid-point.
The company anticipates adjusted EPS to be within $5.56-$5.58, reflecting year-over-year growth of 15% at the mid-point.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, TE Connectivity has a nice Growth Score of B, however its momentum is doing a bit better with an A. 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.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, TE Connectivity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is TE Connectivity (TEL) Down 3.5% Since Last Earnings Report?
A month has gone by since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.
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.
TE Connectivity’s Q3 Earnings & Revenues Top Estimates
TE Connectivity Ltd. delivered third-quarter fiscal 2018 adjusted earnings of $1.43 per share, beating the Zacks Consensus Estimate by 6 cents. Notably, this marked the company’s 11th consecutive earnings beat. The figure also grew 15.3% year over year and steered past the projected range of $1.35-$1.37.
Continued solid execution of the company’s strategic plans resulted in impressive earnings.
Net sales in the quarter were up 12% year over year to $3.764 billion and also topped the Zacks Consensus Estimate of $3.684 million.
Solid segmental performance especially in the transportation and industrial segments drove top-line growth in the reported quarter. Additionally, organic growth in all the segments remained positive throughout the quarter.
The company received total orders of $3.7 billion excluding the company's SubCom business. The figure grew 9% organically from the year-ago quarter.
Top-Line in Detail
TE Connectivity operates in the following three organized segments.
Transportation Solutions: The company generated $2.112 billion of sales (56.2% of net sales) in the reported quarter, up 19.7% on a year-over-year basis. This was driven by solid organic growth of 12% within the segment’s businesses – automotive, commercial transportation and sensor. Further, orders also improved 8% organically. All these can primarily be attributed to robust performance in agriculture, mining, construction and heavy truck areas. Additionally, increasing design wins and strong presence in Americas, Europe and China drove the results.
Industrial Solutions: This segment yielded sales of $988 million (26.2% of net sales) witnessed another strong quarter, rising 9.2% from the prior-year quarter. The company experienced organic growth of 5% in the reported quarter. Further, the orders went up 12% organically. Strength in industrial equipment, Aerospace, Defense and Marine business drove impressive growth.
Communications Solutions: This segment generated sales of $664 million (17.6% of net sales), which decreased 4.7% year over year. This decline was primarily due to fall in SubCom revenues. However, the company maintained its strong momentum in appliances and data and devices businesses throughout the quarter. TE Connectivity witnessed 6% year over year organic growth within the segment. Moreover, by excluding the impact of SubCom, organic growth in orders received came to 8% from the year-ago quarter.
Operating Details
Per the company, the gross margin for the third quarter of fiscal 2018 came in 32.3%, which contracted 150 basis points (bps) from the year-ago quarter. Further, adjusted operating margin came in 16.7%, shriveling 10 bps year over year.
Margin contraction was primarily due to increasing research and development (R&D) activities. R&D expenses were $181 million which went up 7.7% from the prior-year quarter. Further, selling, general, and administrative expenses came in $409 million which increased slightly 0.2% year over year.
Balance Sheet & Cash Flow
As of Jun 29, 2018, TE Connectivity’s cash and cash equivalents of $770 million, greater than $559 million as of Mar 30, 2018.
The company generated free cash flow of $504 million in the reported quarter, up from $377 million in the prior quarter. Further, TE Connectivity paid back $382 million to its shareholders through the means of share repurchases and dividend payments.
Guidance
The company issued encouraging earnings and revenue guidance for the fiscal fourth quarter. It expects net sales in the range of $3.59-$3.69 billion, reflecting growth of 6% at mid-point.
Adjusted earnings per share are projected in the band of $1.31-$1.33, reflecting growth of 6% at mid-point.
Additionally, for fiscal 2018, TE Connectivity anticipates net sales of $14.58-$14.68 billion, reflecting growth of 12% year over year at the mid-point.
The company anticipates adjusted EPS to be within $5.56-$5.58, reflecting year-over-year growth of 15% at the mid-point.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, TE Connectivity has a nice Growth Score of B, however its momentum is doing a bit better with an A. 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.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, TE Connectivity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.