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Teledyne (TDY) Up 6.4% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Teledyne Technologies (TDY). Shares have added about 6.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teledyne due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Teledyne's Q1 Earnings Lag Estimates, '24 EPS View Down

Teledyne Technologies reported first-quarter 2024 adjusted earnings of $4.55 per share, which missed the Zacks Consensus Estimate of $4.64 by 1.9%. However, the bottom line improved 0.4% from $4.53 recorded in the year-ago quarter.

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The company recorded GAAP earnings of $3.72 per share, down 0.3% from the prior-year period’s earnings figure of $3.73.

Operational Highlights

Total sales were $1.35 billion, which missed the Zacks Consensus Estimate of $1.40 billion by 3.6%. The top line also dropped 2.4% from $1.38 billion reported in the year-ago quarter.

This improvement can be attributed to higher year-over-year sales recorded in its Aerospace and Defense Electronics business segment.

Segmental Performance

Instrumentation: Sales in this segment slipped 0.9% year over year to $330.4 million, driven by lower sales from test and measurement instrumentation and environmental instrumentation product lines.

The adjusted operating income increased 5.9% year over year to $89.4 million.

Digital Imaging: Quarterly sales in this division declined 4.1% year over year to $740.8 million. The decrease was due to lower sales of industrial imaging cameras and micro-electro-mechanical systems.

The adjusted operating income dropped 3.7% year over year to $161.8 million.

Aerospace and Defense Electronics: Sales in this segment totaled $185.7 million, up 7.2% from that recorded in the prior-year quarter. The improvement was driven by higher sales of aerospace and defense electronics.

The adjusted operating income increased 10.4% year over year to $52.1 million.

Engineered Systems: Revenues in this division declined 10.5% year over year to $93.2 million due to lower sales of engineered products and energy systems.

This segment's operating income declined 73% to $2.7 million.

Financial Condition

Teledyne’s cash and cash equivalents totaled $912.4 million as of Mar 31, 2024 compared with $648.3 million as of Dec 31, 2023. The total long-term debt was $2.65 billion compared with $2.64 billion as of Dec 31, 2023.

Cashflow from operating activities totaled $291 million at the end of Mar 31, 2024 compared with $203 million as of Mar 31, 2023.

Capital expenditure for the fourth quarter amounted to $15.9 million, down from $24.2 million recorded in the prior-year quarter.

TDY generated free cash flow of $275.1 million at March 2024-end, indicating a 54% year-over-year increase.

Guidance

Teledyne expects to generate adjusted earnings in the band of $4.40-$4.50 per share for the second quarter of 2024. The Zacks Consensus Estimate for TDY’s second-quarter earnings is pegged at $5.07, higher than the company's guided range.

For 2024, Teledyne has lowered its expected adjusted earnings to the range of $19.25-$19.45 per share from its prior guidance range of $20.35-$20.68. The Zacks Consensus Estimate for earnings is pegged at $20.56 per share, higher than the company’s new guidance range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -11.34% due to these changes.

VGM Scores

Currently, Teledyne has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Teledyne has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Teledyne is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Hexcel (HXL), a stock from the same industry, has gained 7.4%. The company reported its results for the quarter ended March 2024 more than a month ago.

Hexcel reported revenues of $472.3 million in the last reported quarter, representing a year-over-year change of +3.2%. EPS of $0.44 for the same period compares with $0.50 a year ago.

Hexcel is expected to post earnings of $0.56 per share for the current quarter, representing a year-over-year change of +12%. Over the last 30 days, the Zacks Consensus Estimate has changed +3%.

Hexcel has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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