TE Connectivity (TEL) Q3 2024 earnings summary

Executive summary

• Q3 FY24 sales reached $4.0B, in line with guidance, up 2% organically year-over-year, with strong performance in Automotive and Communications segments, and continued growth in Aerospace, Defense, Energy, and Medical within Industrial Solutions.

• Adjusted EPS set a quarterly record at $1.91, up 8% year-over-year, driven by 200bps margin expansion; GAAP EPS was $1.86, up 11%.

• Orders rose to $4.1B, up 4% year-over-year and 3% sequentially, led by AI program momentum.

• Record year-to-date free cash flow of $2.0B, up 36% year-over-year, with $1.8B returned to shareholders.

• The company is benefiting from secular growth trends in AI, renewable energy, and vehicle electrification, while offsetting ongoing weakness in general industrial markets.

Financial highlights

• Q3 adjusted operating margin expanded to 19.3% from 17.3% a year ago; GAAP operating margin was 19%.

• Adjusted operating income was $766M; GAAP operating income was $755M, including $5M in acquisition-related charges and $6M in restructuring and other charges.

• Gross margin for Q3 was $1.39B, up from $1.30B year-over-year.

• Free cash flow for Q3 was $867M, up 41% year-over-year; year-to-date free cash flow conversion well above 100%.

• Adjusted EBITDA margin reached 24.5% in Q3 2024, up from 22.3% in Q3 2023.

Outlook and guidance

• Q4 FY24 net sales expected at ~$4.0B, with a $60M year-over-year currency headwind.

• Q4 adjusted EPS projected at ~$1.94, up 9% year-over-year, including a $0.10 headwind from currency and higher tax rate.

• Full-year adjusted EPS is expected to be up 12% year-over-year, with essentially flat sales.

• Double-digit earnings growth and margin expansion anticipated for the fiscal year.

• Communications Solutions Q4 sales to grow in data/devices and appliances, driven by AI momentum.