TE Connectivity (TEL) Holds Steady: A Balanced View of Q2 Earnings and Future Prospects

Analyst Colin Langan of Wells Fargo maintained a Hold rating on TE Connectivity (TEL – Research Report), retaining the price target of $152.00.

Colin Langan has given his Hold rating due to a combination of factors including TE Connectivity’s (TEL) Q2 earnings performance and future growth prospects. The Q2 earnings showed a margin that exceeded consensus, bolstered by strong performances in China and Aerospace, Defense & Marine (AD&M) growth. Despite this, the management’s guidance for Q3 adjusted earnings per share is roughly 4% below the consensus, influenced by unfavorable foreign exchange rates, a slight increase in taxes, and higher net interest expenses. Additionally, while Transportation growth outpaced the industry, Langan anticipates further improvement in the second half of the year and expects the destocking in the Industrial segment to subside by year-end, which should stabilize the market growth.

The report indicates that management is optimistic about TEL’s future, particularly in the Transport sector, with margins expected to stabilize around 20% in FY24, aided by a positive outlook in China. The company is also expected to benefit from new US EPA regulations. Industrial margins in Q2 were better than expected and should remain steady despite ongoing challenges. The destocking phase in the Communications segment has concluded, and there is an anticipated doubling of AI revenue in FY25, suggesting a potential return to high margin levels in the coming years. Langan’s valuation reflects a balance of these positive aspects against the near-term challenges, resulting in the maintenance of a Hold rating for TEL’s stock.

In another report released yesterday, Stifel Nicolaus also maintained a Hold rating on the stock with a $150.00 price target.

TEL’s price has also changed moderately for the past six months – from $118.060 to $140.000, which is a 18.58% increase.

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TE Connectivity (TEL) Company Description:

Switzerland-based TE Connectivity Ltd. designs, manufactures and sells connectivity and sensor solutions. The company, which was founded in 2000, operates through the following segments: Transportation Solutions, Industrial Solutions, and Communications Solutions.