On Thursday, Citi updated its stance on shares of TE Connectivity (NYSE:TEL), a global technology and manufacturing leader, increasing the price target to $160 from the previous $156 while maintaining a Neutral rating.
The adjustment follows TE Connectivity's recent financial performance which aligned with sales expectations, despite foreign exchange headwinds, and exceeded earnings per share (EPS) projections due to improved margins.
The company's September-quarter sales guidance was slightly below market consensus. However, EPS is anticipated to benefit from non-operating items, such as a lower tax rate and higher interest income. TE Connectivity has seen a quarter-over-quarter increase in orders, particularly in the Artificial Intelligence (AI) segment, where orders surged by 100% year-over-year and 50% from the previous quarter.
TE Connectivity has revised its forecast for AI-related revenues for fiscal year 2024 to $250 million, up from the earlier estimate of $200 million. The company also expects these revenues to double to $500 million by fiscal year 2025. The firm's free cash flow (FCF) generation remained robust, with an FCF margin of 21.5%.
Looking forward, Citi anticipates that TE Connectivity can achieve mid-single-digit growth into fiscal year 2025. This growth is expected to be driven by an increase in automotive content, the momentum of AI, and expansion in the energy, medical, and aerospace sectors. This is set against a backdrop of persistent weakness in industrial equipment, commercial transport, and sensors.
The anticipated growth is also expected to be supported by margin expansion due to an improving top line and ongoing restructuring savings. As a result of these factors, Citi has made modest revisions to its estimates for TE Connectivity.
InvestingPro Insights
TE Connectivity (NYSE:TEL) has garnered attention with its solid financial footing and strategic positioning in the technology sector. Notably, the company has been successful in raising its dividend for 14 consecutive years, signaling a commitment to shareholder returns.
Moreover, the firm's stock is trading at a favorable P/E ratio of 13.95, which is attractive relative to its near-term earnings growth. These financial metrics are complemented by a stable price performance, with the stock generally exhibiting low price volatility.
Investors may also take interest in the company's robust cash flows, which have consistently covered interest payments, and its moderate level of debt, which suggests a balanced approach to financial management.
With analysts predicting profitability for the year and a positive outlook on earnings revisions, TE Connectivity stands as a prominent player in the Electronic Equipment, Instruments & Components industry. For those seeking deeper insights and additional metrics, there are 11 more InvestingPro Tips available, which can be explored with a subscription. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
From a data perspective, TE Connectivity's market capitalization stands at $47.41 billion, underlining its significant presence in the market. The company's dividend yield is currently 1.66%, with a notable dividend growth of 10.17% over the last twelve months as of Q3 2024. This financial strength is further evidenced by a year-to-date price total return of 12.58%, showcasing the stock's positive momentum.
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