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TE Connectivity (TEL) Q3 Earnings Top Estimates, Sales Fall Y/Y
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TE Connectivity Ltd. (TEL - Free Report) reported third-quarter fiscal 2024 adjusted earnings of $1.91 per share, which surpassed the Zacks Consensus Estimate by 2.69% and increased 8% year over year.
The year-over-year upside was driven by strong margin expansion.
Net sales in the reported quarter were $3.97 billion, missing the consensus mark by 0.51%. The figure dropped 1% on a reported basis but moved up 2% organically on a year-over-year basis.
Orders were $4.1 billion in the reported quarter, up 4% year over year and 3% sequentially, driven by strong momentum in artificial intelligence programs.
TE Connectivity Ltd. Price, Consensus and EPS Surprise
The Transportation solutions segment generated revenues of $2.33 billion, which contributed 58.6% to net sales. The figure fell 4.2% year over year and missed the Zacks Consensus Estimate by 2.94%.
The company witnessed a 1% decline in automotive sales. Organically, auto sales increased 4%.
Sensor sales were down 15% year over year. Commercial transportation sales fell 10% year over year.
TEL’s initiatives to exit lower-margin and lower-growth products negatively impacted sensor sales, along with weakness in industrial markets.
Industrial solutions segment generated revenues of $1.13 billion, contributing 28.5% to net sales and missing the Zacks Consensus Estimate by 1.24%. The figure dropped 0.7% year over year.
Industrial equipment sales declined 17% year over year, while Aerospace, defense and marine increased 18%. Energy sales declined 2% year over year, while Medical increased 7%.
The Communications solutions segment generated revenues of $516 million, contributing 13% to net sales. The figure increased 21.7% year over year and beat the consensus mark by 11.85%.
Data and device sales increased 31%. Appliance sales were up 9% year over year.
Operating Details
In third-quarter fiscal 2024, GAAP gross margin expanded 230 basis points (bps) year over year to 34.8%.
Selling, general and administrative expenses, as a percentage of revenues, increased 10 bps year over year to 10.8%. Research, development and engineering expenses, as a percentage of revenues, expanded 30 bps to 4.7%.
GAAP operating margin expanded 320 bps year over year to 19%. Adjusted operating margin expanded 200 bps year over year to 19.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Jun 28, 2024, cash and cash equivalents were $1.46 billion, down from $1.18 billion as of Mar 29, 2024.
Long-term debt was $2.95 billion as of Jun 28, 2024, compared with $2.96 billion as of Mar 29, 2024.
TE Connectivity generated $1 billion in cash from operations in the reported quarter, up from $710 million in the previous quarter.
TEL generated a free cash flow of $867 million in the reported quarter, up from $543 million reported in the previous quarter.
Guidance
For fourth-quarter fiscal 2024, TE Connectivity expects net sales of $4 billion with year-over-year organic growth, driven by the Transportation and Communications segments.
Adjusted earnings are projected at $1.94 per share, indicating growth of 9% year over year.
Zacks Rank & Stocks to Consider
Currently, TE Connectivity has a Zacks Rank #3 (Hold).
The stock has gained 7.8% compared with the Zacks Computer and Technology sector’s rise of 23.8% year to date.
Arista Networks (ANET - Free Report) , Apple (AAPL - Free Report) and Cognizant Technology Solutions (CTSH - Free Report) are some better-ranked stocks that investors can consider in the broader sector. Arista Network sports a Zacks Rank #1 (Strong Buy) at present, while Apple and Cognizant Technology Solutions carry a Zacks Rank #2 (Buy) at present. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Arista Networks’ shares have gained 45.4% year to date. ANET is set to report its second-quarter 2024 results on Jul 30.
Apple shares have gained 16.3% year to date. AAPL is set to report its third-quarter fiscal 2024 results on Aug 1.
Cognizant Technology Solutions’ shares have dropped 0.5% year to date. CTSH is set to report its second-quarter 2024 results on Jul 31.
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TE Connectivity (TEL) Q3 Earnings Top Estimates, Sales Fall Y/Y
TE Connectivity Ltd. (TEL - Free Report) reported third-quarter fiscal 2024 adjusted earnings of $1.91 per share, which surpassed the Zacks Consensus Estimate by 2.69% and increased 8% year over year.
The year-over-year upside was driven by strong margin expansion.
Net sales in the reported quarter were $3.97 billion, missing the consensus mark by 0.51%. The figure dropped 1% on a reported basis but moved up 2% organically on a year-over-year basis.
Orders were $4.1 billion in the reported quarter, up 4% year over year and 3% sequentially, driven by strong momentum in artificial intelligence programs.
TE Connectivity Ltd. Price, Consensus and EPS Surprise
TE Connectivity Ltd. price-consensus-eps-surprise-chart | TE Connectivity Ltd. Quote
Top-Line Details
The Transportation solutions segment generated revenues of $2.33 billion, which contributed 58.6% to net sales. The figure fell 4.2% year over year and missed the Zacks Consensus Estimate by 2.94%.
The company witnessed a 1% decline in automotive sales. Organically, auto sales increased 4%.
Sensor sales were down 15% year over year. Commercial transportation sales fell 10% year over year.
TEL’s initiatives to exit lower-margin and lower-growth products negatively impacted sensor sales, along with weakness in industrial markets.
Industrial solutions segment generated revenues of $1.13 billion, contributing 28.5% to net sales and missing the Zacks Consensus Estimate by 1.24%. The figure dropped 0.7% year over year.
Industrial equipment sales declined 17% year over year, while Aerospace, defense and marine increased 18%. Energy sales declined 2% year over year, while Medical increased 7%.
The Communications solutions segment generated revenues of $516 million, contributing 13% to net sales. The figure increased 21.7% year over year and beat the consensus mark by 11.85%.
Data and device sales increased 31%. Appliance sales were up 9% year over year.
Operating Details
In third-quarter fiscal 2024, GAAP gross margin expanded 230 basis points (bps) year over year to 34.8%.
Selling, general and administrative expenses, as a percentage of revenues, increased 10 bps year over year to 10.8%. Research, development and engineering expenses, as a percentage of revenues, expanded 30 bps to 4.7%.
GAAP operating margin expanded 320 bps year over year to 19%. Adjusted operating margin expanded 200 bps year over year to 19.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Jun 28, 2024, cash and cash equivalents were $1.46 billion, down from $1.18 billion as of Mar 29, 2024.
Long-term debt was $2.95 billion as of Jun 28, 2024, compared with $2.96 billion as of Mar 29, 2024.
TE Connectivity generated $1 billion in cash from operations in the reported quarter, up from $710 million in the previous quarter.
TEL generated a free cash flow of $867 million in the reported quarter, up from $543 million reported in the previous quarter.
Guidance
For fourth-quarter fiscal 2024, TE Connectivity expects net sales of $4 billion with year-over-year organic growth, driven by the Transportation and Communications segments.
Adjusted earnings are projected at $1.94 per share, indicating growth of 9% year over year.
Zacks Rank & Stocks to Consider
Currently, TE Connectivity has a Zacks Rank #3 (Hold).
The stock has gained 7.8% compared with the Zacks Computer and Technology sector’s rise of 23.8% year to date.
Arista Networks (ANET - Free Report) , Apple (AAPL - Free Report) and Cognizant Technology Solutions (CTSH - Free Report) are some better-ranked stocks that investors can consider in the broader sector. Arista Network sports a Zacks Rank #1 (Strong Buy) at present, while Apple and Cognizant Technology Solutions carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks’ shares have gained 45.4% year to date. ANET is set to report its second-quarter 2024 results on Jul 30.
Apple shares have gained 16.3% year to date. AAPL is set to report its third-quarter fiscal 2024 results on Aug 1.
Cognizant Technology Solutions’ shares have dropped 0.5% year to date. CTSH is set to report its second-quarter 2024 results on Jul 31.