Electrical components supplier TE Connectivity (TE) continues to excel in various industries, including aerospace, automotive, and telecommunications. The company’s quarterly earnings serve as a reliable indicator of the overall state of the industrial economy.
On Wednesday morning, TE announced better-than-expected quarterly earnings, with solid guidance for the current quarter. As a result, shares experienced a significant increase during premarket trading.
For the fiscal third quarter, TE reported earnings per share (EPS) of $1.77 from sales totaling $4 billion. This surpassed Wall Street’s expectations for EPS of $1.66 and sales of $4.1 billion. Additionally, the company received orders worth approximately $4 billion, resulting in a book-to-bill ratio of 1 for the fiscal third quarter.
Following the release of these impressive results, TE’s stock experienced a slight increase. In contrast, S&P 500 and Dow Jones Industrial Average futures faced a slight decline of 0.2% and 0.3% respectively.
Looking ahead, TE anticipates fiscal fourth-quarter EPS of $1.75 from sales amounting to $4 billion. Currently, Wall Street projects EPS of $1.73 and sales of $4.1 billion. It is worth noting that TE often surpasses its own guidance, which is why the higher guidance is particularly encouraging. For example, in the previous eight quarters, TE exceeded its own EPS guidance seven times by an average of 7 cents. Consequently, there is a possibility that EPS could reach $1.82 a share, representing sequential growth.
Overall, TE Connectivity’s exceptional performance and positive guidance reflect its ongoing success across various industries.
TE Continues to Thrive in Global Market with Electric Vehicles
The impressive global position of TE has once again propelled the company to deliver outstanding performance in transportation. Notably, TE has capitalized on the growing momentum in renewable energy applications and witnessed a recovery in commercial air and medical sectors within its Industrial segment. CEO Terrence Curtin stated, “Our leading global position in electric vehicles once again allowed us to deliver a strong performance in transportation, and we continued to capitalize on growth momentum in renewable energy applications as well as ongoing market recovery in commercial air and medical in our Industrial segment.”
Although the communications segment experienced an expected decline, TE is thrilled about its growing design win momentum in AI applications. With their high-speed connectivity solutions, they anticipate driving future growth in this field. However, the sales in the communications segment fell to $424 million from $671 million compared to the previous year’s same quarter. Additionally, operating profit margins decreased from 25.5% to 13%. Nevertheless, the weakness in the communications segment was offset by the strength in other markets such as cars.
Within the Industrial segment, while sales only saw a marginal increase from $1.13 billion to $1.14 billion year over year, profit margins experienced a dip of approximately 2 percentage points, settling at 13.1%.
The transportation segment emerged as the standout performer for TE, with sales climbing from $2.3 billion to $2.4 billion compared to the previous year. Furthermore, profit margins improved significantly, rising from 14.7% to 17.5%. These remarkable results can be attributed to the continual recovery of global auto production and the shift towards electric vehicles. It is worth noting that TE sells more content for electric vehicles than conventional cars.
It is no surprise that electric vehicles are often associated with Tesla (TSLA). As a prominent supplier to the market leader, TE plays a crucial role in providing parts to the company. Tesla sold approximately 466,000 cars in the second quarter of 2023, indicating substantial growth compared to the roughly 255,000 vehicles sold during the same period in 2022.
To discuss the outstanding results and various developments, management will be hosting a conference call at 8:30 a.m. Eastern time.
As of now, TE stock has witnessed an impressive 23% increase this year and has surged by approximately 15% over the past 12 months.
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