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It has been about a month since the last earnings report for TE Connectivity (TEL). Shares have added about 3.2% 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 Q3 Earnings & Revenues Beat Estimates
TE Connectivity has reported third-quarter fiscal 2021 adjusted earnings of $1.79 per share, which surpassed the Zacks Consensus Estimate by 13.3%. The figure surged 203.4% year over year.
Net sales in the reported quarter were $3.8 billion, which beat the consensus mark of $3.7 billion. The figure rose 51% from the year-ago quarter.
Top-line growth was driven by well-performing transportation, communications and industrial solutions of the company.
However, TE Connectivity witnessed pandemic-induced supply-chain constraints, which were acting as headwinds.
Nevertheless, the company’s strong momentum across hybrid and electric vehicles, and data and devices remains a major positive.
Transportation Solutions: The segment generated $2.3 billion, which accounted for 58.9% of the net sales. The figure surged 81% year over year. This can be attributed to strong content growth, which led to a 101% year-over-year rise in the company’s automotive sales. Commercial transportation sales grew 64% year over year. Sensor sales grew 26% from the year-ago quarter on the back of solid momentum among auto and commercial transportation applications.
Industrial Solutions: The segment generated $1 billion, which accounted for 26.1% of net sales. The figure rose16% year over year. This was driven by robust industrial equipment sales, which grew 42% from the prior-year quarter. Solid momentum across renewable applications led to 8% growth in energy sales. Recovery in interventional procedures led to 11% year-over-year growth in the medical category.
However, weakness in the commercial aerospace market remained a headwind.
Communications Solutions: The segment generated $578 million, which accounted for 15% of net sales. Further, the figure rose35% year over year. This was driven by solid content growth from cloud applications, which led to a year-over-year riseof 19% in data and devices sales. Appliance sales grew 64% from the prior-year quarter,which contributed well.
Per management, gross profit was $1.3 billion, which was up 79.3% year over year. As a percentage of revenues, the figure expanded 520 basis points (bps) from the year-ago quarter to 32.9%.
We note that selling, general and administrative expenses, and research and development expenses of $366 million and $168 million rose14% and 15.1% year over year, respectively.
The company’s adjusted operating margin was 19.1% in the reported quarter, which expanded 970 bps year over year.
Balance Sheet & Cash Flow
As of Jun 25, 2021, cash and cash equivalents were $1.4 billion, down from $1.7 billion as of Mar 26, 2021.
Long-term debt was $3.63 billion in the fiscal third quarter, up from $3.60 billion in the prior quarter.
The company generated $682 million of cash from operations in the reported quarter compared with $580 million in the previous quarter.
It generated free cash flow of $539 million. The company returned $447 million to its shareholders.
For fourth-quarter fiscal 2021, TE Connectivity expects net sales of $3.8 billion.
Adjusted earnings are projected to be$1.65 per share.
For fiscal 2021, net sales are projected at $14.9 billion.
Adjusted earnings for fiscal 2021 are expected to be $6.47 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 6.09% due to these changes.
At this time, TE Connectivity has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise TE Connectivity has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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