10-QPeriod: Q3 FY2018

TE Connectivity plc Quarterly Report for Q3 Ended Jun 29, 2018

Filed July 26, 2018For Securities:TEL

Summary

TE Connectivity plc (TEL) reported strong performance in the third quarter and first nine months of fiscal year 2018, with net sales increasing by 11.8% and 13.8% respectively, compared to the prior year periods. This growth was primarily driven by significant gains in the Transportation Solutions and Industrial Solutions segments, supported by organic growth, favorable foreign currency exchange rates, and contributions from acquisitions. The company demonstrated robust operational execution, with net cash provided by operating activities reaching $1,527 million for the first nine months of fiscal 2018. Management provided an optimistic outlook for the fourth quarter and full fiscal year 2018, projecting continued sales growth, albeit with some moderation in the Communications Solutions segment due to specific program delays. The company also highlighted its ongoing commitment to returning capital to shareholders through dividends and share repurchases, with $1.4 billion remaining under its share repurchase authorization.

Financial Highlights

52 data points
Beta

Revenue

$3.58B

33.1% Gross Margin

Net Income

$454.00M

12.7% Net Margin

EPS (Diluted)

$1.29

Total Assets

$19.01B

Cash & Equivalents

$770.00M

Free Cash Flow

$566.00M

Financial Statements
Beta
Revenue$3.58B
Cost of Revenue$2.39B
Gross Profit$1.19B
SG&A Expenses$394.00M
Operating Income$554.00M
Interest Expense$26.00M
Net Income$454.00M
EPS (Basic)$1.30
EPS (Diluted)$1.29
Shares Outstanding (Basic)349.00M
Shares Outstanding (Diluted)352.00M

Key Highlights

  • 1Net sales increased by 11.8% in Q3 FY18 and 13.8% in the first nine months of FY18 year-over-year.
  • 2Transportation Solutions segment saw a 19.7% sales increase in Q3 FY18, driven by automotive, commercial transportation, and sensors.
  • 3Industrial Solutions segment reported a 9.2% sales increase in Q3 FY18, with growth across industrial equipment, aerospace, defense, oil, and gas.
  • 4Communications Solutions segment experienced a 4.7% sales decrease in Q3 FY18, primarily due to production delays in subsea communications.
  • 5Net cash provided by operating activities was $1,527 million for the first nine months of FY18.
  • 6Diluted earnings per share from continuing operations for Q3 FY18 was $1.29.
  • 7The company repurchased approximately $612 million of its common shares in the first nine months of FY18 and has $1.4 billion remaining under its share repurchase authorization.

Frequently Asked Questions

TE Connectivity's revenue growth in the third quarter of fiscal year 2018 was primarily driven by strong performance in the Transportation Solutions segment (up 19.7%) and the Industrial Solutions segment (up 9.2%). This growth was fueled by a combination of organic sales increases, a positive impact from foreign currency exchange rates, and contributions from recent acquisitions. The automotive sector within Transportation Solutions was a key contributor.

While overall operating income increased, segment profitability varied. Transportation Solutions showed a healthy increase in operating income, reflecting higher volumes and improved cost management. Industrial Solutions saw a slight decrease in operating income for the quarter, impacted by restructuring charges, but an increase over the nine-month period. Communications Solutions experienced a notable decline in operating income, primarily due to decreases in the subsea communications business. The company's overall operating margin for the quarter was 14.8%.

TE Connectivity anticipates continued sales growth in the fourth quarter of fiscal year 2018, with projected net sales between $3.59 billion and $3.69 billion. The outlook for full fiscal year 2018 projects net sales between $14.58 billion and $14.68 billion. Diluted earnings per share from continuing operations are expected to be between $1.23 and $1.25 for the fourth quarter and between $3.79 and $3.81 for the full fiscal year. Growth is expected to be led by Transportation and Industrial Solutions, with offsetting declines in Communications Solutions.

The company generated strong operating cash flow of $1,527 million in the first nine months of fiscal 2018. TE Connectivity continues to invest in capital expenditures, expecting them to be around 6% of net sales for fiscal 2018. They are also actively returning capital to shareholders through dividends and share repurchases. Dividends paid increased to $435 million in the first nine months of FY18. Furthermore, the company repurchased approximately $612 million of its common shares in the same period and has $1.4 billion remaining under its share repurchase authorization.