TE Connectivity (TEL) Q2 Earnings Beat Estimates, Sales Fall Y/Y
TE Connectivity Ltd. TEL reported second-quarter fiscal 2024 adjusted earnings of $1.86 per share, which surpassed the Zacks Consensus Estimate by 1.64% and increased 12.7% year over year.
The year-over-year growth was driven by strong margin expansion.
Net sales in the reported quarter were $3.97 billion, which beat the consensus mark by 1.64%. The figure declined 4.6% on a reported basis and 3% organically on a year-over-year basis.
Orders were $4 billion in the reported quarter, up 6% sequentially.
TE Connectivity Ltd. Price, Consensus and EPS Surprise
TE Connectivity Ltd. price-consensus-eps-surprise-chart | TE Connectivity Ltd. Quote
Top-Line Details
Transportation solutions segment generated revenues of $2.38 billion, which accounted for 60.1% of net sales. The figure decreased 4% year over year and beat the Zacks Consensus Estimate by 0.03%.
The company witnessed a 3% decline in automotive sales. Organically, auto sales increased 1%.
Sensor sales were down 11% year over year. Commercial transportation sales fell 5% year over year.
TEL’s initiatives to exit lower-margin and lower-growth products negatively impacted sensor sales, along with weakness in industrial markets.
Industrial solutions segment generated revenues of $1.14 billion, which accounted for 28.8% of net sales and beat the Zacks Consensus Estimate by 0.33%. The figure declined 4% year over year.
Industrial equipment sales declined 23% year over year, while Aerospace, defense and marine increased 15%. Energy sales remained unchanged year over year, while Medical increased 6%.
The Communications solutions segment generated revenues of $440 million, which accounted for 11.1% of net sales. The figure declined 9.5% year over year but beat the consensus mark by 0.14%.
The year-over-year decline was attributed to broad market weakness. Data and device sales decreased 5% and appliance sales fell 16% year over year.
Operating Details
In second-quarter fiscal 2024, GAAP gross margin expanded 350 basis points (bps) year over year to 34.4%.
Selling, general and administrative expenses, as a percentage of revenues, increased 70 bps year over year to 11.2%. Research, development and engineering expenses, as a percentage of revenues, expanded 20 bps to 4.6%.
GAAP operating margin expanded 450 bps year over year to 17.4%. Adjusted operating margin expanded 260 bps year over year to 18.5% in the reported quarter.
Balance Sheet & Cash Flow
As of Mar 29, 2024, cash and cash equivalents were $1.18 billion, up from $1.17 billion as of Dec 29, 2023.
Long-term debt was $2.96 billion as of Mar 29, 2024 compared with $3.59 billion as of Dec 29, 2023.
TE Connectivity generated $710 million in cash from operations in the reported quarter, down from $719 million in the previous quarter.
TEL generated a free cash flow of $543 million in the reported quarter, down from $570 million reported in the previous quarter.
Guidance
For third-quarter fiscal 2024, TE Connectivity expects net sales of $4 billion with year-over-year organic growth driven by the Transportation and Communications segments.
The Zacks Consensus Estimate for the same is pegged at $4.11 billion, suggesting year-over-year growth of 2.71%.
Adjusted earnings are projected at $1.85 per share, indicating growth of 5% year over year. The consensus mark is pegged at $1.92 per share, up by a penny over the past 30 days.
Zacks Rank & Stocks to Consider
Currently, TE Connectivity has a Zacks Rank #3 (Hold).
Opera OPRA, Advanced Micro Devices AMD and Pinterest PINS are some better-ranked stocks that investors can consider in the broader sector. While Opera and Pinterest sport a Zacks Rank #1 (Strong Buy) each at present, AMD has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Opera shares have gained 8.6% year to date. OPRA is set to report its first-quarter 2024 results on Apr 25.
AMD shares have gained 5.3% year to date. AMD is set to report its first-quarter 2024 results on Apr 30.
Pinterest shares have declined 11.3% year to date. PINS is set to report its first-quarter 2024 results on Apr 30.
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