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Teledyne (TDY) Down 7.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Teledyne Technologies (TDY). Shares have lost about 7.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teledyne due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Teledyne Technologies Q1 Earnings Beat, Revenues Up Y/Y

Teledyne Technologies Inc. reported first-quarter 2021 earnings of $3.02 per share, which surpassed the Zacks Consensus Estimate of $2.59 by 16.6%. The bottom line also improved 12.9% from the year-ago quarter’s $2.02.

The year-over-year bottom-line growth can be attributed to solid sales and an improvement in the operating income in the reported quarter.

Including one-time items, the company reported first-quarter GAAP earnings per diluted share of $2.23, compared to the year-ago quarter’s $2.17.

Operational Highlights

In the quarter under review, total sales amounted to $805.7 million, which exceeded the Zacks Consensus Estimate of $780 million by 3.3%. Moreover, the top line increased 2.7% from $784.6 million a year ago. Except for the Aerospace and Defense Electronics segment, all other segments recorded solid year-over-year sales growth in the first quarter.

Segmental Performance

Instrumentation: Sales at this segment rose 0.5% year over year to $286.5 million in the first quarter. Increased sales of environmental instrumentation and test and measurement instrumentation led to the upside.

Operating income rose 16.9% year over year to $59.4 million on account of higher margins across most product lines.

Digital Imaging: Quarterly sales at this division increased 6.7% year over year to $263.3 million. The improvement can be attributed to increased sales of industrial and scientific sensors and cameras, detectors for space imaging applications, as well as geospatial imaging systems.

Operating income grew 18.7% year over year to $52 million, reflected the increase in sales as well as improved margins across most product categories.

Aerospace and Defense Electronics: At this segment, quarterly sales of $151.2 million declined 3.3% from the prior-year quarter owing to decreased sales for aerospace electronics. The continuous weakness in the commercial aerospace industry has affected sales of aerospace electronics in the quarter.

However, operating income soared 111.2% year over year to $28.3 million, which reflected the impact of a lower cost structure due to actions taken in 2020, lower severance, facility consolidation and lower research and development costs.

Engineered Systems: Sales at this division grew 8.5% year over year to about $104.7 million in the first quarter.

The uptick was driven by higher sales of engineered products and increased sales from defense and other manufacturing programs, as well as electronic manufacturing services products.

Operating income surged 30.7% to $14.9 million on account of higher sales and improved mix of manufacturing programs.

Financial Condition

Teledyne’s cash and cash equivalents totaled $3,234.2 million as of Apr 4, 2021, compared with $673.1 million at the end of 2020.

Long-term debt summed $3,243.3 million compared with $680.9 million at 2020-end.

Cash from operations at the end of the first quarter amounted to $124.9 million compared with $76.4 million at the end of first-quarter 2020.

In the reported quarter, capital expenditures were $17.6 million compared with $20.2 million in the year-ago quarter. Moreover, the company generated free cash flow of $107.3 million compared with $56.2 million in the year-ago quarter.

Q2 & 2021 Guidance

Teledyne expects to generate adjusted earnings per share of $2.85-$2.95 in the second quarter of 2021. The Zacks Consensus Estimate for the same is pegged at $2.78, which lies below the company’s guided range.

For 2021, the company expects to generate adjusted earnings per share of $12.00-$12.20. Currently, the Zacks Consensus Estimate for Teledyne’s full-year earnings is pegged at $11.45 per share, which is lower than the company’s bottom-line expectations.

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 5.58% due to these changes.

VGM Scores

Currently, Teledyne has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Teledyne has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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