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Why Is Teledyne (TDY) Up 10.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Teledyne Technologies (TDY). Shares have added about 10.5% 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 the most recent earnings report in order to get a better handle on the important drivers.

Teledyne Technologies Q3 Earnings Beat, Sales Rise Y/Y

Teledyne Technologies reported third-quarter 2022 adjusted earnings of $4.54 per share, which surpassed the Zacks Consensus Estimate of $4.30 by 5.6%. The bottom line improved 4.6% from the year-ago quarter’s $4.34 per share.

Including one-time items, the company reported GAAP earnings of $3.74 per share, which improved 33.1% from the year-ago quarter’s $2.81.

Operational Highlights

Total sales in the third quarter amounted to $1,363.3 million, which came in line with the Zacks Consensus Estimate. The top line improved 3.9% from the $1,311.9 million reported a year ago. All segments recorded higher year-over-year sales in the third quarter.

Segmental Performance

Instrumentation: Sales in this segment improved 6.7% year over year to $306.4 million in the third quarter. Higher sales across all external product lines led to the upside.

The segment’s operating income improved 12.9% year over year to $71.1 million, driven by higher sales and a favorable product mix.

Digital Imaging: Quarterly sales in this division increased 2.3% year over year to $777.9 million. The improvement was driven by the higher sales of industrial and scientific sensors, cameras, X-ray products and commercial infrared imaging solutions.

Moreover, the segment’s operating income rose 40.9% year over year to $133.7 million.

Aerospace and Defense Electronics: In this segment, sales of $169.5 million went up 4.8% from the prior-year quarter due to the higher sales of aerospace electronics and defense electronics.

The operating income also improved 23.4% year over year to $44.3 million due to the higher sales of aerospace electronics and improved margins across most product categories.

Engineered Systems: Sales in this division increased 7.2% year over year to $109.8 million in the third quarter. The operating income increased 3.5% to $11.9 million.

Financial Condition

Teledyne’s cash and cash equivalent totaled $479.3 million as of Oct 2, 2022 compared with $474.7 million as of Jan 2, 2022. The total long-term debt was $3,618.4 million compared with $4,099.4 million as of Jan 2, 2022.

Its cash provided by operating activities was $268.9 million in the third quarter of 2022 compared with $192.8 million in the third quarter of 2021.

In the reported quarter, capital expenditures amounted to $16.7 million, down from $29.2 million in the year-ago quarter figure.

Moreover, TDY generated adjusted free cash flow of $252.2 million in the third quarter of 2022, reflecting a 52.2% year-over-year surge.

Guidance

Teledyne expects to generate adjusted earnings in the band of $4.46-$4.56 per share in the fourth quarter of 2022. The Zacks Consensus Estimate for quarterly earnings, pegged at $4.59, is higher than the guided range.

For 2022, the company increased its earnings expectation to the $17.70-$17.80 per share range from the prior guidance in the band of $17.45-$17.70 per share. The Zacks Consensus Estimate of $17.61 per share for 2022 earnings is lower than the guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Teledyne has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. Notably, Teledyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Teledyne belongs to the Zacks Aerospace - Defense Equipment industry. Another stock from the same industry, Raytheon Technologies (RTX), has gained 5.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Raytheon Technologies reported revenues of $16.95 billion in the last reported quarter, representing a year-over-year change of +4.6%. EPS of $1.21 for the same period compares with $1.26 a year ago.

For the current quarter, Raytheon Technologies is expected to post earnings of $1.24 per share, indicating a change of +14.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +7.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Raytheon Technologies. Also, the stock has a VGM Score of D.

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