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Why Is Teledyne (TDY) Up 3.9% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Teledyne Technologies (TDY). Shares have added about 3.9% 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 Technologies Q2 Earnings Beat, '19 EPS View Up

Teledyne Technologies reported second-quarter 2019 earnings of $2.80 per share, which surpassed the Zacks Consensus Estimate of $2.40 by 16.7%. The bottom line also improved 20.7% from the year-ago quarter’s figure of $2.32.

The year-over-year bottom-line growth can be attributed to solid sales and record improvement in the operating margin that Teledyne witnessed in the quarter under review.

Operational Highlights

Total sales in the second quarter amounted to $782 million, which missed the Zacks Consensus Estimate of $783 million by a mere 0.2%. The top line, however, increased a solid 6.8% from $732.5 million registered a year ago. Notably, all segments recorded solid year-over-year sales growth in the quarter.

Segmental Performance

Instrumentation: Sales at this segment inched up 0.6% year over year to $264.1 million in the second quarter. Increased sales of test and measurement instrumentation, environmental instrumentation led to the upside.

Operating income surged 19.8% year over year to $49 million on account of higher margins across most product lines.

Digital Imaging: Quarterly sales at this division increased 11.5% year over year to $251.3 million. The improvement can be attributed to increased sales of X-ray detectors for life sciences applications, aerospace, defense and MEMS products. Also, sales from the acquisition of the Scientific Imaging businesses of Roper Technologies contributed to the top line.

Operating income grew 21.2% year over year to $52.5 million backed by higher sales and favorable product mix.

Aerospace and Defense Electronics: At this segment, quarterly sales of $191 million rose 10.1% from the prior-year quarter number owing to increased sales of defense electronics.

Operating income surged 16.9% year over year to $39.4 million driven by higher sales and improved margins.

Engineered Systems: Sales at this division grew 6.3% year over year to about $75.6 million in the second quarter. The uptick was driven by higher sales of engineered products and services.

Operating income declined 1.4% to $7.3 million on account of product mix.

Financial Condition

Teledyne’s cash totaled $108.1 million as of Jun 30, 2019, compared with $142.5 million at the end of 2018. Total debt summed $791.7 million compared with $747.5 million at 2018 end.

Cash from operations at the end of second-quarter 2019 amounted to $83.2 million compared with $107.9 million at the end of 2018’s second quarter.

In the reported quarter, capital expenditures amounted to $18.1 million compared with $27.4 million in the year-ago quarter. Moreover, the company generated free cash flow of $65.1 million, reflecting 19.1% annual growth.

Guidance

Teledyne expects to generate GAAP earnings of $2.50-$2.55 per share in the third quarter of 2019. The Zacks Consensus Estimate for third-quarter GAAP earnings is pegged at $2.46, lower than the company’s bottom-line expectations.

For 2019, the company raised its earnings expectations from the range of $9.45-$9.55 to $9.86-$9.96 per share. The Zacks Consensus Estimate for Teledyne’s full-year earnings stands at $9.58, lower than the company’s expectations.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

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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. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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 trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Teledyne has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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