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TE Connectivity (TEL) Down 1.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have lost about 1.7% in that time frame, outperforming 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 catalysts.
TE Connectivity's Q2 Earnings & Revenues Beat Estimates
TE Connectivity has reported second-quarter fiscal 2022 adjusted earnings of $1.81 per share, which surpassed the Zacks Consensus Estimate by 5.8%. The figure rose 15% year over year.
Net sales in the reported quarter were $4.01 billion, which beat the consensus mark of $3.81 billion. The figure rose 7% from the year-ago quarter.
Top-line growth was driven by well-performing communications and industrial solutions of the company.
We note that the company’s strong momentum across hybrid and electric vehicles, data and devices, factory automation, renewable energy, and cloud remains a major positive.
Top-Line Details
Transportation Solutions: The segment generated $2.3 billion, which accounted for 58% of net sales. The figure grew 1% year over year. The company witnessed 1% growth in automotive sales, which was driven by the growing proliferation of electric vehicles and strong content trends of electronification. Further, commercial transportation sales grew 3% year over year.
However, sensor sales fell 3% from the year-ago quarter. Nevertheless, the solid momentum of the sensor business across transportation applications was a positive.
Industrial Solutions: The segment generated $1.07 billion, which accounted for 27% of net sales. The figure rose 13% year over year. This was driven by robust industrial equipment sales, which grew 39% from the prior-year quarter, owing to the growing capital investment in factory automation applications. Solid momentum across renewable applications also remained positive for the company’s energy business.
However, declining energy, medical and, aerospace, defense and marine sales were concerning.
Communications Solutions: The segment generated $618 million, which accounted for 15% of net sales. Further, the figure rose 24% year over year. This was driven by solid content growth in high-speed cloud applications, which led to a year-over-year rise of 39% in data and devices sales. Appliance sales grew 5% from the prior-year quarter, which contributed well.
Operating Details
Per management, the gross profit was $1.3 billion, which was up 10.5% year over year. As a percentage of revenues, the figure expanded 110 basis points (bps) from the year-ago quarter to 33.4%.
We note that selling, general and administrative expenses, and research and development expenses of $416 million and $185 million rose 3.7% and 6.3% year over year, respectively.
The company’s adjusted operating margin was 18.4% in the reported quarter, which expanded 140 bps year over year.
Balance Sheet & Cash Flow
As of Mar 25, 2021, cash and cash equivalents were $749 million, down from $982 million as of Dec 24, 2021.
Long-term debt was $3.4 billion in the fiscal second quarter, down from $3.5 billion in the prior quarter.
The company generated $413 million of cash from operations in the reported quarter compared with $532 million in the previous quarter.
Further, it generated a free cash flow of $242 million.
The company returned $670 million to shareholders.
Guidance
For third-quarter fiscal 2022, TE Connectivity expects year-over-year net sales growth of 1.4% and 3.3% on a reported and organic basis, respectively.
Adjusted earnings are projected at $1.75 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, TE Connectivity has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 C. 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. Notably, 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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TE Connectivity (TEL) Down 1.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for TE Connectivity (TEL - Free Report) . Shares have lost about 1.7% in that time frame, outperforming 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 catalysts.
TE Connectivity's Q2 Earnings & Revenues Beat Estimates
TE Connectivity has reported second-quarter fiscal 2022 adjusted earnings of $1.81 per share, which surpassed the Zacks Consensus Estimate by 5.8%. The figure rose 15% year over year.
Net sales in the reported quarter were $4.01 billion, which beat the consensus mark of $3.81 billion. The figure rose 7% from the year-ago quarter.
Top-line growth was driven by well-performing communications and industrial solutions of the company.
We note that the company’s strong momentum across hybrid and electric vehicles, data and devices, factory automation, renewable energy, and cloud remains a major positive.
Top-Line Details
Transportation Solutions: The segment generated $2.3 billion, which accounted for 58% of net sales. The figure grew 1% year over year. The company witnessed 1% growth in automotive sales, which was driven by the growing proliferation of electric vehicles and strong content trends of electronification. Further, commercial transportation sales grew 3% year over year.
However, sensor sales fell 3% from the year-ago quarter. Nevertheless, the solid momentum of the sensor business across transportation applications was a positive.
Industrial Solutions: The segment generated $1.07 billion, which accounted for 27% of net sales. The figure rose 13% year over year. This was driven by robust industrial equipment sales, which grew 39% from the prior-year quarter, owing to the growing capital investment in factory automation applications. Solid momentum across renewable applications also remained positive for the company’s energy business.
However, declining energy, medical and, aerospace, defense and marine sales were concerning.
Communications Solutions: The segment generated $618 million, which accounted for 15% of net sales. Further, the figure rose 24% year over year. This was driven by solid content growth in high-speed cloud applications, which led to a year-over-year rise of 39% in data and devices sales. Appliance sales grew 5% from the prior-year quarter, which contributed well.
Operating Details
Per management, the gross profit was $1.3 billion, which was up 10.5% year over year. As a percentage of revenues, the figure expanded 110 basis points (bps) from the year-ago quarter to 33.4%.
We note that selling, general and administrative expenses, and research and development expenses of $416 million and $185 million rose 3.7% and 6.3% year over year, respectively.
The company’s adjusted operating margin was 18.4% in the reported quarter, which expanded 140 bps year over year.
Balance Sheet & Cash Flow
As of Mar 25, 2021, cash and cash equivalents were $749 million, down from $982 million as of Dec 24, 2021.
Long-term debt was $3.4 billion in the fiscal second quarter, down from $3.5 billion in the prior quarter.
The company generated $413 million of cash from operations in the reported quarter compared with $532 million in the previous quarter.
Further, it generated a free cash flow of $242 million.
The company returned $670 million to shareholders.
Guidance
For third-quarter fiscal 2022, TE Connectivity expects year-over-year net sales growth of 1.4% and 3.3% on a reported and organic basis, respectively.
Adjusted earnings are projected at $1.75 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, TE Connectivity has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 C. 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. Notably, TE Connectivity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.