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Teledyne Up on Q1 Preliminary Results Amid Coronavirus Woes

Zacks Equity Research

Teledyne Technologies, Inc. TDY recently released its preliminary financial results for first-quarter 2020. Notably, the company expects to achieve record sales and GAAP earnings per share (EPS) in the soon-to-be-reported quarter, outweighing the impacts of the novel coronavirus outbreak that has created quite an upheaval in the global economy.

The industrial conglomerate is scheduled to report its first-quarter results on Apr 22, 2020.

Investors Gain Confidence

Teledyne’s recently announced preliminary results boosted investors’ confidence. As a result, share price of this company rose 6.8% in the last trading session to close at $19.66 on Apr 6.

In fact, shares of Teledyne have been rallying for quite some time. Notably, the company has gained 24.5% against the industry's 34.5% decline over the past year.

 

Preliminary Numbers in Detail

Per the latest announcement, the company projects sales of $785 million in the first quarter of 2020, which indicates an annual increase of more than 5% including positive organic growth. The Zacks Consensus Estimate for quarterly sales is pegged at $799 million.

Moreover, Teledyne expects GAAP EPS in the range of $2.10-$2.15, including certain restructuring and other pre-tax charges totaling $9.4 million but excluding one potential non-recurring charge during the first quarter. Now this guidance range indicates an annual improvement of 4-6% when compared with $2.02 in first-quarter 2019.

However, this guidance compares unfavorably with the earlier provided bottom-line expectation of $2.25-$2.35 per share.

Moreover, orders exceeded sales in each month of the first quarter, resulting in record backlog of approximately $1.8 billion.

Meanwhile, to tackle the ongoing economic turmoil, Teledyne has undertaken a number of cost-reduction actions, details of which will be provided along with its upcoming quarterly results. Further, the company is projected to lower its outlook for full-year 2020 from the one it provided on its fourth-quarter earnings call.  

Factors Driving Q1 Prelim Results

Teledyne earns its revenues from a wide variety of markets ranging from aerospace and defense, electronics design and development to medical imaging and pharmaceutical research. Such a diverse portfolio makes the company resilient against market fluctuations at times of crisis like the current one.

Moreover, since Teledyne’s business portfolio includes critical infrastructure sectors such as the defense industrial base, water and wastewater as well as healthcare and public health, the company’s operations have not been fully stalled. Per management, over one-third of its employees have been working remotely.

These factors must have made it confident of achieving sales as well as earnings growth in the first quarter. This, in turn, might have boosted investor confidence as evident from the aforementioned share price increase.

Apart from generating organic growth through product sales, the practice of making strategic acquisitions has always been part of Teledyne’s growth story. Keeping up with this trend, in January 2020, the company acquired OakGate Technology. We expect positive synergies from this buyout to have contributed to Teledyne’s solid quarterly estimates.

However, the company expects to incur a pretax charge of approximately $40 million related to certain accounts receivable and inventory as a result of the bankruptcy of OneWeb Global Limited and affiliates. This, in turn, might have led it to slash its first-quarter earnings guidance.

Zacks Rank & Key Picks

Teledyne currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are AeroVironment AVAV, Elbit Systems ESLT and Moog MOG.A, each of which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AeroVironment delivered average positive earnings surprise of 5.72% in the trailing four quarters. The company has a long-term earnings growth estimate of 25%.

Elbit Systems came up with positive earnings surprise of 11.26% in the last reported quarter. The Zacks Consensus Estimate for the company’s 2020 earnings indicates an annual improvement of 12.7%.

Moog delivered average positive earnings surprise of 4.76% in the trailing four quarters. The Zacks Consensus Estimate for the company’s fiscal 2020 earnings indicates an annual improvement of 8.6%.

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