Yahoo Finance Why Is TE Connectivity (TEL) Up 12.3% Since Last Earnings Report?
It has been about a month since the last earnings report for TE Connectivity (TEL). Shares have added about 12.3% in that time frame, outperforming 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 catalysts.
TE Connectivity's Q4 Earnings & Revenues Beat Estimates
TE Connectivity reported fourth-quarter fiscal 2022 adjusted earnings of $1.88 per share, which surpassed the Zacks Consensus Estimate by 0.5%. The figure rose 11.2% from the year-ago fiscal quarter’s reading and 1.1%, sequentially.
Net sales in the reported quarter were $4.4 billion, which beat the consensus mark by 3.3%. The figure rose 14% on a reported basis and 21%, organically, from the respective year-ago fiscal quarter’s readings. TEL also increased 6.4%, sequentially.
Top-line growth was driven by the well-performing transportation, communications and industrial solutions of TEL.
TE Connectivity generated orders of $4.3 billion in the reported quarter, reflecting continued strong customer demand.
Top-Line Details
Transportation Solutions: The segment generated $2.45 billion, accounting for 56% of net sales. The figure grew 11% from the year-ago fiscal quarter’s actuals. TEL witnessed 14% growth in automotive sales, driven by the growing proliferation of electric vehicles. Commercial transportation sales also grew 14% from the year-ago fiscal quarter’s tally, driven by a strong performance in North America and Europe. However, sensor sales fell 2% from the year-ago fiscal quarter’s level due to portfolio optimization activities.
Industrial Solutions: The segment generated $1.25 billion, accounting for 29% of net sales. The figure rose 23% from the year-ago fiscal quarter’s reported number. This was driven by robust industrial equipment sales, which grew 35% from the prior-year fiscal quarter’s figure owing to continued benefits from factory automation applications. Aerospace, defense and marine sales improved 21% on market improvement in commercial aerospace. Solid momentum across renewable applications remained positive for TEL’s energy business, which rose 16% from the year-ago fiscal quarter’s reported figure. Medical sales’ growth of 8% from the prior-year fiscal quarter’s level was attributed to higher interventional procedures.
Communications Solutions: The segment generated $660 million, accounting for 15% of net sales. The figure was up 10% from the year-ago fiscal quarter’s actuals. This was driven by solid content growth in high-speed cloud applications, leading to a 19% rise from the year-ago fiscal quarter’s reading in data and devices sales. However, appliance sales fell 5% from the prior-year fiscal quarter’s reading, reflecting moderation in the end market.
Operating Details
Per management, the gross profit was $1.35 billion, up 6.8% from the year-earlier fiscal quarter’s level. As a percentage of revenues, the figure contracted 200 basis points (bps) from the year-ago fiscal quarter’s level to 31%.
We note that selling, general and administrative expenses, and research and development expenses of $412 million and $179 million rose 7.3% and 3.5% from the respective year-ago fiscal quarter’s actuals, respectively.
TE Connectivity’s adjusted operating margin was 17.4% in the reported quarter, which contracted 110 bps from the year-ago fiscal quarter’s reported figure.
Balance Sheet & Cash Flow
As of Sep 30, 2022, cash and cash equivalents were $1.09 billion, up from $820 million as of Jun 24, 2022.
Long-term debt was $3.29 billion in the fiscal fourth quarter, down from $3.38 billion in the prior fiscal quarter.
TE Connectivity generated $944 million of cash from operations in the reported quarter compared with $579 million in the sequential fiscal quarter. Further, it generated a free cash flow of $745 million.
TEL returned $515 million to its shareholders.
Guidance
For first-quarter fiscal 2023, TE Connectivity expects net sales of $3.75 billion with 2% growth on a reported basis from the year-ago fiscal quarter’s reading and 9% on an organic basis.
Adjusted earnings are projected at $1.50 per share. The consensus mark is pegged at $1.74 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -12.93% due to these changes.
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 a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 Ltd. (TEL) : Free Stock Analysis Report
