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Bull Of The Day: Teledyne Technologies (TDY)

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Teledyne Technologies (TDY) is an excellent inflation play following the sizable increase in inflationary expectations from the FOMC's post-meeting projections. TDY's relative buoyancy amid last week's selloff reaffirms my confidence in this stock as a robust cyclical name to hold for the remainder of 2021. Analysts are increasingly optimistic about this stock, raising their near and long-term EPS estimates and driving TDY into a Zacks Rank #1 (Strong Buy).

Teledyne's vast array of cutting-edge tech-driven products are utilized in critical industrial growth markets that heavily rely on its products. This allows the company to easily pass on their price increases to their end markets with little to no margin deterioration.

TDY is an under-the-radar inflation play that hasn't gained the market traction that I believe it deserves. You can see this from both its lack of analyst coverage and relatively low daily market volume. Nevertheless, TDY is trading around its 50-day moving average (utilizing it as both a support and resistance), riding higher for the past month, heading towards my Fibonacci-derived price target of $495 (over 16% upside).


Image Source: TradingView

FLIR Deal Closed

Teledyne just closed an enormous synergy driving acquisition of FLIR Systems (FLIR) last month. These businesses have complementary product offerings in proprietary sensor technology that will provide immediate value to the combined enterprise.

TDY investors were initially wary of this acquisition when announced on the first trading day of 2021 trading because of the 40% premium they offered for FLIR shares, catalyzing an immediate 7.5% pullback. However, it only took just over a week of trading for the stock to recover as investors saw the robust value proposition in this acquisition.

FLIR continues to get awarded lucrative government contracts that drive revenue growth and visibility. The business keeps adding to its backlog of government contracts that range from the Pentagon to the French Defense Procurement Agency. Last month the company announced in a press release that it had "received more than $70 million in new orders for its advanced ground robots from the U.S. Armed Services."

The Business

Teledyne is a high-growth industrial business categorized under aerospace & defense equipment in the Zacks database, but the company is so much more than that. According to the company website, Teledyne's end markets include "aerospace and defense, factory automation, air & water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging, and pharmaceutical research." Industries that are all at the forefront of this 4th Industrial Revolution, which is just commencing.

The company has demonstrated excellent operational management with robust growth that is just beginning to accelerate. Teledyne is expected to illustrate top and bottom-line growth of 44.2% & 21.4% this year followed by 23.6% & 18.6% in 2022, respectively. The margin expansion that this enterprise has been able to illustrate continues to impress analysts, with this past quarter demonstrating record operational margin.

Final Thoughts

All 4 of the covering sell-side analysts on the ZRS platform call it a buy today, and I couldn't agree more. In addition, TDY's most recent sell-side company report illustrated an extremely bullish call from a very reputable firm of $520 a share (over 22% upside).

Every quarter it seems analysts are raising their price targets on persistent earnings beats. Now that military powerhouse FLIR Systems is in the business mix, I expect the company will continue to impress.

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