Based on TE Connectivity Ltd’s (NYSE:TEL) earnings update in June 2018, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 40% next year against the past 5-year average growth rate of 3.1%. By 2019, we can expect TE Connectivity’s bottom line to reach US$1.9b, a jump from the current trailing-twelve-month US$1.3b. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
Longer term expectations from the 16 analysts covering TEL’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of US$1.7b and the final forecast of US$2.9b by 2021, the annual rate of growth for TEL’s earnings is 17%. EPS reaches $6.95 in the final year of forecast compared to the current $4.71 EPS today. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. Margins is currently sitting at 13%, which is expected to expand to 20% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For TE Connectivity, there are three relevant factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is TE Connectivity worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TE Connectivity is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of TE Connectivity? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.