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TE Connectivity (TEL) Q4 Earnings & Sales Top, View Upbeat

TE Connectivity Ltd. TEL scored its eighth consecutive earnings beat as the company reported fourth-quarter fiscal 2017 adjusted earnings of $1.25 per share, beating the Zacks Consensus Estimate of $1.16 by 7.8%. The figure also steered past the projected range of $1.14-$1.16.

The impressive earnings were driven by continued progress on strategic priorities, solid execution and impressive top-line growth. Encouraged by the successful execution and all-round growth, the company released upbeat earnings and revenue guidance for first-quarter fiscal 2018.

On a GAAP basis, the company’s earnings from continuing operations came in at $1.21 per share, down from $1.22 reported in the year-ago quarter.

Inside the Headlines

Net sales in the quarter were up 3.7% year over year at $3,456 million and also topped the Zacks Consensus Estimate of $3,259 million. Solid performance in two of the three segments drove the quarterly top-line growth. Excellent traction in the company’s harsh environment businesses, which has been a staple profit churner over the past quarters, contributed significantly to the top line.

Segmental Performance

Transportation Solutions revenues came in at $1,844 million in the reported quarter, up 15% on a year-over-year basis. Orders in the transportation segment came in at $1,704 million, up 13% on a year-over-year basis. Organic growth in automotive, commercial transportation, and sensors across all regions boosted the top line.

Industrial Solutions revenues had another strong quarter, rising 12% year over year to $954 million. Orders in this quarter rose 15% to $830 million. The impressive growth was driven by strength in industrial equipment, factory automation & medical applications. Solid Aerospace, Defense and Marine business contributed to the segment revenues, which was slightly offset by decline in the Energy business in Europe. Also, the previously completed Creganna and Intercontec acquisitions added significantly to growth.

Communications Solutions revenues climbed 4% year over year to $658 million. Orders were up 6% year over year to $412 million, led by strength in Asia in both Data and Devices and Appliances. Growth of this segment was bolstered by strength in Asia in both Data and Devices, and double-digit growth in appliances.

The company’s adjusted operating margin for the quarter expanded 110 basis points from the year-ago quarter to 16.8%.

TE Connectivity Ltd. Price, Consensus and EPS Surprise

Liquidity & Cash Flow

TE Connectivity exited the quarter with cash and cash equivalents of $1,218 million, higher than $647 million a year back.

The company generated free cash flow of $691 million in the quarter, up from $604 million in the prior-year quarter.

Share Repurchase Program/Dividend

In fiscal 2017, the company returned $1.2 billion to shareholders through dividends and share repurchases.


The company enhanced its harsh environment portfolio with bolt-on acquisitions in the Automotive and Medical business.

The company recently acquired Hirschmann Car Communication, which focuses on vehicle connectivity technology used in antenna and infotainment systems. TE Connectivity also acquired MicroGroup, which makes specialized shafts for medical applications. These acquisitions will unlock expansion opportunities, and advance content growth in key applications for the automotive and medical markets.


TE Connectivity projects first-quarter fiscal 2018 adjusted earnings per share in the range of $1.23-$1.27, reflecting growth of 9% at the mid-point. It expects revenues to lie in the range of $3.35-$3.45 billion (which reflects growth of 10% year over year at the mid-point).

To Conclude

TE Connectivity delivered yet another impressive quarter with strong top- and bottom-line beats. The company’s fiscal 2018 earnings guidance and robust sales forecast are likely to go very well with investors, as it carries its robust growth momentum into fiscal 2018.

Most of the company’s operating margin expansion in the past few years have been driven by the transportation segment. Encouragingly, in recent times we observed that both the Communications and Industrial segments are contributing significantly to the operating margin expansion as well, thus adding to the company’s strength.

Going forward, we believe the previously completed Creganna and Intercontec acquisitions will continue to unlock significant opportunities in the transportation and industrial segments. Overall, we believe strong demand in end markets, along with an overarching business model, will continue to drive TE Connectivity’s future growth.

Zacks Rank & Stocks to Consider

TE Connectivity carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader space include Kemet Corporation KEM, Universal Display Corporation OLED and ZAGG Inc ZAGG, each sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kemet Corporation generated huge, consecutive beats over the trailing four quarters, for an average positive surprise of 64.8%.

Universal Display also has a striking earnings surprise history, with an outstanding average beat of 534.2% over the trailing four quarters, driven by three massive beats.

ZAGG has beaten earnings estimates thrice over the trailing four quarters. Last quarter, it beat estimates by 20%.

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