Why Is Teledyne (TDY) Up 6.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Teledyne Technologies (TDY). Shares have added about 6.5% 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 catalysts.

Teledyne Technologies Q4 Earnings Beat on Higher Sales

Teledyne Technologies reported fourth-quarter 2019 adjusted earnings of $2.90 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 5.1%. The bottom-line figure came above the guided range of $2.71-$2.76 for the reported quarter.

Including one-time items, the company reported GAAP earnings of $3.06 per share, which improved 24.9% from the year-ago quarter’s $2.45 driven by solid sales growth and improvement in operating margin.

The company’s 2019 adjusted earnings came in at $10 compared with $8.51 in 2018. The full- year figure missed the Zacks Consensus Estimate of $10.42.

Operational Highlights

Total sales in the fourth quarter amounted to $834.2 million, which exceeded the Zacks Consensus Estimate of $826 million by 1%. The top line also rose 11.5% from $748.4 million reported a year ago. Notably, all segments, except Engineered Systems recorded solid year-over-year sales in the quarter.

For the full year, Teledyne reported sales of $3.16 billion, up 9% from $2,901.8 million in the year-ago period. The full-year top-line figure came in line with the Zacks Consensus Estimate.

Segmental Performance

Instrumentation: Sales at this segment grew 14.5% year over year to $301.6 million in the fourth quarter. Increased sales of environmental instrumentation and marine instrumentation led to the upside.

Operating income surged 38.4% year over year to $59.5 million on account of higher sales and improved margins across most of its product lines.

Digital Imaging: Quarterly sales at this division increased 20.1% year over year to $268.1 million. The improvement can be attributed to higher sales of X-ray detectors for life sciences applications and space, defense, geospatial and MEMS products. Also, sales from the acquisitions of the scientific imaging businesses of Roper Technologies and Micralyne contributed to this segment’s top-line growth.

Operating income improved 29.8% year over year to $47.1 million due to higher sales and product mix differences.

Aerospace and Defense Electronics: At this segment, quarterly sales of $170.4 million rose 2.7% from the prior-year quarter, owing to increased sales of defense electronics.

Operating income dropped 7.3% year over year to $32.8 million on account of product mix differences.

Engineered Systems: Sales at this division slipped 1.7% year over year to about $94.1 million in the fourth quarter on lower sales of engineered products and energy systems.

Operating income declined 1.9% to $10.5 million on account of lower sales.

Financial Condition

Teledyne’s cash totaled $199.5 million as of Dec 29, 2019, compared with $142.5 million at the end of 2018. Total long-term debt was $750 million compared with $610.1 million at 2018 end.

Cash provided by operating activities was $167.9 million for the fourth quarter of 2019 compared with $125.5 million for the fourth quarter of 2018.

In the reported quarter, capital expenditures amounted to $23.9 million compared with $18.7 million in the year-ago quarter. Moreover, the company generated free cash flow of $144 million in the fourth quarter, reflecting 34.8% year-over-year growth.

Guidance

Teledyne expects to generate GAAP earnings of $2.25-$2.35 per share in the first quarter of 2020.

For 2020, the company expects earnings of $11.20-$11.30 per share. The Zacks Consensus Estimate for Teledyne’s full-year earnings stands at $11.38, higher than the company’s expectations.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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