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Teledyne (TDY) Up 7.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Teledyne Technologies (TDY - Free Report) . Shares have added about 7.8% 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 Beats on Q1 Earnings, Lowers '20 EPS View

Teledyne Technologies reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%. The bottom line also improved 12.9% from the year-ago quarter’s $2.02.

The year-over-year bottom-line growth can be attributed to solid sales and an improvement in the operating income in the reported quarter.

Including one-time items, the company reported first-quarter GAAP earnings per diluted share of $2.17, which improved 7.4% from the year-ago quarter’s $2.02.

Operational Highlights

In the quarter under review, total sales amounted to $784.6 million, which missed the Zacks Consensus Estimate of $785 million by a whisker. However, the top line increased 5.3% from $745.2 million a year ago. Except for the Aerospace and Defense Electronics segment, all other segments recorded solid year-over-year sales growth in the first quarter.

Segmental Performance

Instrumentation: Sales at this segment rose 11.2% year over year to $285.1 million in the first quarter. Increased sales of environmental instrumentation, marine instrumentation, and test and measurement instrumentation led to the upside.

Operating income rose 27.3% year over year to $50.8 million on account of increased sales and higher margins across most product lines.

Digital Imaging: Quarterly sales at this division increased 6.2% year over year to $246.7 million. The improvement can be attributed to increased sales of infrared detectors for defense applications, MEMS products and X-ray detectors for life sciences applications, as well as $8.8 million in incremental sales from the 2019 acquisitions.

Operating income grew 19.7% year over year to $43.8 million, backed by higher sales and product mix differences.

Aerospace and Defense Electronics: At this segment, quarterly sales of $156.3 million declined 6.2% from the prior-year quarter owing to decreased sales for aerospace electronics. The weakness in the commercial aerospace industry has affected sales of aerospace electronics in the quarter.

Operating income plunged 58.8% year over year to $13.4 million, driven by lower sales and $8.2 million of severance, facility consolidation and certain contract adjustment costs.

Engineered Systems: Sales at this division grew 7.6% year over year to about $96.5 million in the first quarter. The uptick was driven by higher sales of engineered products and energy systems.

Operating income surged 78.1% to $11.4 million on account of higher sales and improved mix of manufacturing programs.

Financial Condition

Teledyne’s cash and cash equivalents totaled $231.4 million as of Mar 29, 2020, compared with $199.5 million at the end of 2019. Long-term debt summed $749.1 million compared with $750 million at 2019-end.

Cash from operations at the end of the first quarter amounted to $76.4 million compared with $80.1 million at the end of first-quarter 2019.

In the reported quarter, capital expenditures were $20.2 million compared with $21.3 million in the year-ago quarter. Moreover, the company generated free cash flow of $56.2 million compared with $58.8 million in the year-ago quarter.

Guidance

Teledyne expects to generate GAAP earnings per share of $1.90-$2.05 in the second quarter of 2020. For 2020, the company has lowered its earnings expectations from $11.20-$11.30 per share to $9.30-$10.

Currently, the Zacks Consensus Estimate for Teledyne’s full-year earnings is pegged at $9.99 per share, which is at the higher end of its updated bottom-line expectations.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted 25.16% due to these changes.

VGM Scores

Currently, Teledyne has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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

Teledyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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