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Teledyne (TDY) Stock Up on Impressive Q4 Preliminary Results

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Zacks Equity Research
·4 min read
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Teledyne Technologies, Inc. TDY recently released its preliminary financial results for fourth-quarter and full-year 2020. Notably, the company expects to achieve an all-time record GAAP earnings per share (EPS) in the soon-to-be-reported quarter.

The industrial conglomerate is yet to release its scheduled date for the fourth-quarter results.

Investors Gain Confidence

Teledyne’s recently announced preliminary results boosted investors’ confidence, offsetting the stock’s decline of 8%, following the announcement of its FLIR Systems FLIR acquisition, on Jan 4. Consequently, share price of this company rose 3.6% in the last trading session to close at $375.49 on Jan 5.

In fact, shares of Teledyne have been rallying for quite some time. Notably, the company has gained 4.1% against the industry's 33.4% decline over the past year.

 

 

Preliminary Numbers in Detail

Per the latest announcement, the company projects sales of $800 million in the fourth quarter of 2020, which indicates an annual decline of 4.1%. The estimated top-line figure is however higher than the Zacks Consensus Estimate of $786 million.

Moreover, Teledyne expects GAAP EPS in the range of $3.16-$3.19, which reflects stark improvement from the company’s prior guidance of $2.56-$2.86. The updated guidance range also indicates an annual improvement of 3-4% when compared with $3.06 in fourth-quarter 2019.

Currently, the Zacks Consensus Estimate for earnings is pegged at $3.18, which is within the company provided guidance.

For 2020, Teledyne currently expects to generate GAAP earnings per share in the range of $10.30- $10.33, impressive when compared with the prior outlook of $9.70 - $10.00.

The updated guidance range however indicates a decline of 3.7-4% when compared with $10.73 in 2019.

Currently, the Zacks Consensus Estimate for earnings is pegged at $10.32, which lies within the mid-point of the company provided guidance.

Further, Teledyne’s management expects to achieve record cash flow for both the fourth quarter and full year 2020, ending the year with approximately $115 million of net debt.

Factors Influencing Q4 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. While a steady flow of contracts for its combat-proven defense solutions continue to contribute significantly to the company’s quarterly sales, consistent weakness in the commercial aerospace industry, courtesy of the COVID-19 crisis has been impacting its aerospace electronics sales in the last two reported quarters.

In fact, majority of defense equipment stocks like Hexcel HXL and Curtiss-Wright CW who have a strong presence in the commercial aerospace have been bearing the brunt of the COVID-19 crisis in the past few months.

Teledyne’s fourth-quarter sales are likely to have suffered due to the lingering effects of the pandemic. This must have paved the way for the company to set a sales target that is lower than the year-ago fourth-quarter’s level.

On the other hand, the company expects to incur a charge of $3 million in the fourth quarter in association of OneWeb’s exit from bankruptcy.

Nevertheless, this should not hurt its bottom line, as the fourth-quarter operating margin of 17.5% that Teledyne expects in its preliminary results indicates a notable improvement of 150 basis points from fourth-quarter 2019.

In particular, Teledyne has been witnessing more or less stable operating margin over the past couple of quarters, in spite of the turmoil created by the COVID-19 crisis, driven by head count management and business simplification initiatives. Such optimistic trends must have encouraged the company to upgrade its earnings outlook for both fourth-quarter and full-year 2020.

Zacks Rank

Teledyne currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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