TE Connectivity (TEL) Q1 Earnings: What's In The Cards?

TE Connectivity Ltd. (NYSE:TEL) is set to report fiscal first-quarter 2019 results on Jan 23.

The company has surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering average positive earnings surprise of 5.57%.

In the last reported quarter, TE Connectivity’s’ adjusted earnings of $1.35 per share recorded a positive surprise of 1.5%. Further, the figure surged 19.5% year over year and exceeded the projected range of $1.31-$1.33 per share.

Net sales in the quarter were up 1.5% year over year to $3.51 billion.However, the figure missed the Zacks Consensus Estimate of $3.64 billion.

Solid segmental performance, especially in the Industrial and Communications segments, drove top-line growth in the last reported quarter. Additionally, organic growth in all the segments contributed significantly.

For the fourth quarter, the company expects adjusted earnings in the band of $1.25-$1.29 per share. The Zacks Consensus Estimate for earnings is pegged at $1.28 per share.

Further, the company anticipates net sales in the range of $3.33 billion and $3.43 billion. The Zacks Consensus Estimate is projected at $3.38 billion.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

TE Connectivity is witnessing normalizing seasonal trends in its business which remains a major positive. Markets like commercial transportation, factory automation and appliances are expected to continue normalizing. This is likely to benefit the company’s to-be-reported quarter results.

Further, the company’s robust solutions portfolio comprised of transportation, industrial and communication solutions are expected to aid its end-market performance. Moreover, continued content growth in all the markets is a tailwind.

In Transportation solutions, the company is likely to outperform the commercial transportation space despite declining trend in the global auto production.

Notably, the segment is anticipated to witness growth at low single-digits organically. However, improving orders within the segment driven by continued strength in automotive and sensors are likely to aid sales within the segment in the quarter under review.

Further, Industrial Solutions segment is poised to grow in mid-single digits with growth anticipated in aerospace, defence, marine and medical applications.

Moreover, Communications Solutions segment is expected to grow in mid-single digits. The growth will primarily be backed by strength in data and devices unit.

We believe TE Connectivity’s solid momentum across its segments is likely to drive the top-line growth.

However, currency fluctuations remain a concern.

Nevertheless, the company’s strengthening global position is expected to benefit its appliance business. Further, sale of the company’s SubCom business is also helping in reducing volatility in the company’s product portfolio.

These factors are anticipated to aid the company’s results in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

TE Connectivity currently has a Zacks Rank #3 and an Earnings ESP of +1.26%, which indicates that the company is likely to beat estimates in the to-be-reported quarter.

Other Stocks That Warrant a Look

Here are some other stocks worth considering as our model shows that these too have the right combination of elements to deliver an earnings beat in the upcoming releases.

Amazon (NASDAQ:AMZN) has an Earnings ESP of +0.68% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square (NYSE:SQ) has an Earnings ESP of +6.6% and a Zacks Rank #2.

Agilent Technologies (NYSE:A) has an Earnings ESP of +2.74% and a Zacks Rank #3.

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