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Teledyne (TDY) Up 3.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Teledyne Technologies (TDY - Free Report) . Shares have added about 3.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teledyne due for a pullback? 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.

Teledyne Technologies Q3 Earnings Beat, '19 View Raised

Teledyne Technologies reported third-quarter 2019 earnings of $2.84 per share, which surpassed the Zacks Consensus Estimate of $2.53 by 12.3%. The bottom line also improved 16.9% from the year-ago quarter’s $2.43 on solid sales and record improvement in the operating margin.

Operational Highlights

Total sales in the third quarter amounted to $802.2 million, which exceeded the Zacks Consensus Estimate of $781 million by 2.7%. The top line also rose 10.6% from $725.3 million reported a year ago. Notably, all segments recorded solid year-over-year sales in the quarter

Segmental Performance

Instrumentation: Sales at this segment grew 10.4% year over year to $282.9 million in the third quarter. Increased sales of test and measurement instrumentation, and environmental instrumentation led to the upside.

Operating income surged 45.7% year over year to $52 million on account of higher sales and improved margins across most of its product lines.

Digital Imaging: Quarterly sales at this division increased 10.6% year over year to $244 million. The improvement can be attributed to higher sales of X-ray detectors for life sciences applications and aerospace, defense and MEMS products along with a $23.5-million contribution from acquisitions of the scientific imaging businesses of Roper Technologies, Inc and Micralyne Inc.

Operating income declined 2.6% year over year to $41.2 million due to unfavorable product mix.

Aerospace and Defense Electronics: At this segment, quarterly sales of $177.1 million rose 10.5% from the prior-year quarter, owing to increased sales of defense electronics.

Operating income grew 19.7% year over year to $39.5 million, driven by higher sales and improved margins.

Engineered Systems: Sales at this division grew 11.5% year over year to about $98.2 million in the third quarter on higher sales of engineered products and services, and turbine engines.

Operating income rose 10.4% to $10.6 million on account of higher sales.

Financial Condition

Teledyne’s cash totaled $128.5 million as of Sep 29, 2019, compared with $142.5 million at the end of 2018. Total long-term debt summed $719.3 million compared with $610.1 million at 2018 end.

Cash provided by operating activities was $150.9 million for the third quarter of 2019 compared with $141.9 million for the third quarter of 2018.
In the reported quarter, capital expenditures amounted to $25.1 million compared with $20.9 million in the year-ago quarter. Moreover, the company generated free cash flow of $125.8 million in the third quarter, reflecting 4% annual growth.

Guidance

Teledyne currently expects to generate GAAP earnings of $2.71-$2.76 per share in the fourth quarter of 2019. The Zacks Consensus Estimate for fourth-quarter GAAP earnings is pegged at $2.58, lower than the company’s bottom-line expectations.

For 2019, the company raised its earnings expectations from $9.86-$9.96 to $10.37-$10.42 per share. The Zacks Consensus Estimate for Teledyne’s full-year earnings stands at $9.98, lower than the company’s expectations.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.78% due to these changes.

VGM Scores

Currently, Teledyne has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Teledyne has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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