TE Connectivity (TEL) Q4 Earnings Beat Estimates, Sales Fall Y/Y
TE Connectivity Ltd. TEL reported fourth-quarter fiscal 2023 adjusted earnings of $1.78 per share, which surpassed the Zacks Consensus Estimate by 1.1%.
However, the figure decreased 5.3% year over year.
Net sales in the reported quarter were $4.04 billion, which beat the consensus mark by 0.71%. The figure fell 7.4% on a reported basis and 1.4% organically from the respective year-ago fiscal quarter’s readings.
Orders were $3.9 billion in the reported quarter, with sequential growth in the Transportation and Communications segments.
TE Connectivity Ltd. Price, Consensus and EPS Surprise
TE Connectivity Ltd. price-consensus-eps-surprise-chart | TE Connectivity Ltd. Quote
TEL shares have underperformed the Zacks Computer & Technology sector year to date. Shares have gained 2.7%, while the broader sector has returned 30.3%.
Top-Line Details
Transportation solutions segment generated revenues of $2.41 billion, which accounted for 59.8% of net sales. The figure declined 1.4% year over year and lagged the Zacks Consensus Estimate by 0.54%.
The company witnessed 2% growth in automotive sales. Sensor sales were down 5% year over year, owing to solid momentum across automotive applications. Commercial transportation sales dropped 12.8% year over year.
Industrial solutions segment generated revenues of $1.16 billion, which accounted for 28.7% of net sales, and lagged the Zacks Consensus Estimate by 1.9%. The figure declined 6.8% year over year.
Industrial equipment sales declined 24.4% year over year, while Aerospace, defense and marine increased 3.2%. Energy and Medical increased 2.7% and 12.4%, respectively.
Communications solutions segment generated revenues of $463 million, which accounted for 11.5% of net sales. The figure declined 30.7% year over year but beat the consensus mark by 15.94%.
The year-over-year decline was attributed to broad market weakness. Data and device sales decreased 32.3% and appliance sales fell 27.7% year over year.
Operating Details
In fourth-quarter fiscal 2023, GAAP gross margin expanded 90 basis points (bps) year over year to 31.8%.
Selling, general and administrative expenses, as a percentage of revenues, increased 80 bps year over year to 10.2%. Research, development, and engineering expenses, as a percentage of revenues, increased 20 bps year over year to 4.3%.
GAAP operating margin expanded 60 bps year over year to 15.7%. Adjusted operating margin was flat year over year at 17.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Sep 29, 2023, cash and cash equivalents were $1.66 billion, up from $1.1 billion as of Jun 30, 2023.
Long-term debt was $3.529 billion as of Sep 29, 2023 compared with $3.915 billion as of Jun 30.
TE Connectivity generated $1.14 billion in cash from operations in the reported quarter, up from $779 million in the previous quarter.
TEL generated a free cash flow of $945 million in the reported quarter, up from $614 million reported in the previous quarter.
Guidance
For first-quarter fiscal 2024, TE Connectivity expects net sales of $3.85 billion, flat on both a reported and organic basis year over year. The Zacks Consensus Estimate for the same is pegged at $3.96 billion, suggesting year-over-year growth of 2.99%.
Adjusted earnings are projected at $1.70 per share, up more than 10% year over year. The consensus mark is pegged at $1.70 per share, unchanged over the past 30 days.
Zacks Rank & Stocks to Consider
Currently, TE Connectivity has a Zacks Rank #4 (Sell).
eGain EGAN, GoDaddy GDDY and Itron ITRI are some better-ranked stocks that investors can consider in the broader sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
eGain shares have declined 33.3% year to date. EGAN is set to report its first-quarter fiscal 2024 results on Nov 2.
GoDaddy shares have declined 2.1% year to date. GDDY is set to report its third-quarter 2023 results on Nov 2.
Itron shares have returned 13.1% year to date. ITRI is set to report its third-quarter 2023 results on Nov 2.
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