On Wednesday, BofA Securities adjusted its outlook on TE Connectivity (NYSE:TEL), a global technology and manufacturing company, reducing the price target to $165 from the previous $173 while maintaining a Buy rating on the stock. The firm's analysis indicates an expectation for the company's fourth-quarter revenue and earnings per share (EPS) to align with guidance and consensus estimates at $4 billion and $1.94, respectively.
The forecast for TE Connectivity's first-quarter fiscal year 2025 revenue stands at $3.9 billion, which represents a 2.5% sequential decline and falls slightly below the Street's estimate of $4 billion. The analyst predicts the first-quarter guidance could surpass typical seasonal trends, which usually show a low to mid-single digit decline.
This potential uptick is attributed to increased revenues from artificial intelligence and favorable foreign exchange movements, although tempered by a softer automotive sector. No full-year fiscal 2025 guidance is expected at this time.
For fiscal year 2025, BofA Securities projects TE Connectivity's revenue to be approximately $16.3 billion, which is marginally lower than the consensus estimate of $16.7 billion. Despite the minor reduction in expected revenue, the firm reaffirms its Buy rating, citing the company's consistent delivery of solid growth and improving profitability as key reasons for the positive outlook.
TE Connectivity, known for its connectivity and sensor solutions, has been navigating an evolving market landscape, balancing growth in some sectors against challenges in others. The company's performance in the upcoming quarters will be closely watched by investors as these forecasts and guidance materialize.
In other recent news, TE Connectivity has undergone several significant changes. The company's recent earnings results met sales expectations and surpassed earnings per share projections, generating a record $2 billion in free cash flow over the first three quarters. Additionally, the company expressed potential interest in future mergers and acquisitions aligning with its markets and technologies.
Baird has adjusted its price target for TE Connectivity, noting potential for sustained growth in the Transportation Solutions sector into the fourth quarter of fiscal year 2024, despite potential delays in the industrial sector. Meanwhile, analysts from Evercore ISI and Wolfe Research have maintained an Outperform rating for the company, while Citi and Truist Securities have kept a neutral stance.
The company has announced executive transitions, including the appointment of Sam Eldessouky to its board of directors and the transition of Steve Merkt, President of Transportation Solutions, to an advisory role, with Aaron Stucki succeeding him. Furthermore, TE Connectivity is restructuring into two primary divisions: Transportation Solutions and Industrial Solutions.
Lastly, TE Connectivity is preparing for a move from the New York Stock Exchange to Ireland, with the transition expected to be finalized by September 30, 2024.
InvestingPro Insights
TE Connectivity's financial metrics and market performance offer additional context to BofA Securities' analysis. The company's P/E ratio of 12.37 suggests a relatively attractive valuation, especially considering its PEG ratio of 0.18, which indicates potential undervaluation relative to its growth prospects. This aligns with BofA's maintained Buy rating, despite the lowered price target.
The company's revenue for the last twelve months as of Q3 2024 stood at $15.81 billion, with a slight decline of 3.34% year-over-year. This data point provides perspective on BofA's revenue forecast of $16.3 billion for fiscal year 2025, suggesting an expected return to growth. TE Connectivity's strong gross profit margin of 33.89% and operating income margin of 18.31% demonstrate its ability to maintain profitability, supporting BofA's positive outlook on the company's improving profitability.
InvestingPro Tips highlight TE Connectivity's consistent dividend growth, with a 10.17% increase over the last twelve months, and a current dividend yield of 1.78%. This trend of increasing shareholder returns aligns with the company's solid financial position and may contribute to its attractiveness for investors.
For readers interested in a deeper dive, InvestingPro offers 14 additional tips for TE Connectivity, providing a more comprehensive analysis of the company's financial health and market position.
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