Evercore ISI Reiterates Outperform Rating on TE Connectivity (TEL) Following EPS
Evercore ISI analyst Amit Daryanani reiterated an Outperform rating and $180.00 price target on TE Connectivity (NYSE: TEL) following earnings earlier today.
The analyst commented, "TEL reported Dec-qtr results of $3.84B/$1.95–below street expectations on sales but above street expectations for EPS (street at $3.9B/$1.89) – the revenue headwind looks largely driven by f/x along with pockets of softness in CV and medical segments. Despite total sales being flattish y/y, margins shifted to 19.4% and were up 30bps on a y/y basis, and EPS came above guidance (+6% y/y). Transportation Solutions was weaker -6% y/y, (-5% y/y organically), while Industrial Solutions grew +11% y/y (+9% organically). Overall orders in the quarter were up +6% y/y and +4% q/q with the Industrial segment seeing book to bill all above 1.0, showing momentum in all businesses and some recovery in end markets. From a segment basis, Transport saw a decline in Sensors and Commercial Transportation from weakness in Europe and NA offset by organic growth in Asia. TEL is expecting auto production to be down -1-2% for the full year and content growth to be in the lower range of 4-6%. Despite this, the company remains optimistic on EV adoption and is seeing momentum from software defined architectures, particularly in China (securing a $1B design win with a leading Chinese auto OEM). Industrial is beginning to see some green shoots with stabilization in orders—management sounded incrementally positive here vs. 90 days ago. Specifically, Digital Data Networks and AD&M continue to show strong momentum (+48% y/y and +15% y/y respectively) while Medical was weaker (down -25% y/y) due to inventory normalization. TEL guided Mar-qtr revenues and EPS slightly below street - implying sales are flattish y/y and slightly up sequentially for them largely due to an unfavorable Fx environment. For the full year, TEL is expecting currency headwinds to be over $300M (~$100M of impact per quarter). We now expect FY25 Rev/EPS of $16.2B/$8.08, implying sales to be up +2.3% y/y (vs. street at $16.4B/$8.06). Net/Net: TEL is poised to benefit from multiple tailwinds—HVOR recovery, AI ramps (>$600M for FY25), and broad recovery in industrial end markets. Disciplined execution, margin expansion, and cash generation position TEL well long-term despite a flatter top-line. Sticking with our OP rating and $180 price target."
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Shares of TE Connectivity closed at $148.30 yesterday.