TE Connectivity outpaces Wall Street predictions in Q2

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TE Connectivity to open new plant in Morocco.
Image: TE Connectivity

TE Connectivity recently announced its fiscal second-quarter results, which beat Wall Street expectations on revenue and profit. The firm also recorded meaningful sequential segment growth despite facing COVID-19 related disruption.

However, the component company offered guidance that indicates a sales decline in the third quarter but a long-term recovery.

TE Connectivity Q2 Financial Performance

In the March quarter, the Swiss manufacturer made $3.195 billion in sales against earnings per share of $1.29. In doing so, the company met the Q2 revenue expectations it provided in January and even exceeded its income prediction. The firm also outpaced the consensus earnings estimate calculated by Zacks Equity Research.

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On a year-over-year basis, however, TE recorded a 6.35 percent drop in revenue and a 9.15 percent decrease in earnings per share.

The manufacturer explained its second-quarter results suffered as a result of the coronavirus pandemic suppressing demand for its products. The company also disclosed it incurred a $60 million loss because of forex headwinds.

On a more positive note, TE reported an uptick in its overall orders that grew its bill-to-book ratio from 1.02 to 1.05 sequentially. The component company also posted quarter-over-quarter gains in its industrial and transportation segments of 9 and 14 percent, respectively, and improved its year-to-date cash flow by 34.1 percent.

TE stated its positive Q2 outcomes came about because of proactive cost-cutting measures and the variety of its catalog.

COVID-19 Q3 Impact and Beyond

For the current quarter, the component company forecasts a 25 percent decline in sales from Q2 because of the continuing impact of the coronavirus pandemic. The firm believes COVID-19 will hit its transportation and commercial aerospace segments the hardest. Like Infineon, TE has experienced a drop off in automotive part orders because the crisis has devastated global auto sales.

Overall, the corporation expects to take a $300 million financial hit in the fiscal third quarter due to coronavirus related supply chain disruption.

That said, TE is taking action to reduce its expenses and physical infrastructure in response to current market challenges. The manufacturer completed its acquisition of First Sensor in March, which will further diversify its already robust product lineup. In addition, the Swiss multinational has more than $2 billion in available liquidity, meaning it has a significant financial buffer.

No organization can predict when the coronavirus pandemic will be contained or how long the markets will need to recover. However, TE’s decisiveness, fiscal acumen, and judicious product management indicate resilience is one of its core brand strengths.

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