Company Reports

We maintain our $135 per share fair value estimate for narrow-moat TE Connectivity after its March quarter results fit our expectations. Our long-term thesis is intact. TE’s automotive demand is holding steady to start the year, reflecting stable auto production and a continued mix shift toward electric vehicles. Industrial and telecom demand have been weaker this year, but we see guidance for communications growth next quarter as positive. TE’s profitability has remained impressive in fiscal 2024, which we credit to consolidation of the firm’s manufacturing footprint. We see shares as fairly valued.

We maintain our $135 fair value estimate for shares of narrow-moat TE Connectivity after its fiscal first-quarter sales came in under our expectations, but profitability outperformed. Margins in the quarter were abnormally high, in our opinion, but we expect them to normalize through the rest of fiscal 2024. Still, we believe it will be a year of strong profit performance for TE. TE’s end markets continued to show mixed results, with transportation sales still buoying the overall business against weaker demand in industrial equipment and communications. We see shares as fairly valued. In our view, the 8% runup in the market following the firm’s release is an overreaction to good profitability, especially to a one-time tax gain in GAAP results that we don’t see reflecting fundamentals.

TE Connectivity designs and manufactures connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications industries. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives almost half of its revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

We raise our fair value estimate for shares of narrow-moat TE Connectivity to $135, from $128, as we bake in expectations for a recovery in results beginning in fiscal 2024. Fiscal fourth-quarter results and fiscal first-quarter guidance were roughly in line with our model. TE is seeing pockets of weak demand in industrial equipment, heavy vehicles, and telecom customers, but we're encouraged by ongoing good results in automotive sales and growth for artificial intelligence, or AI, related sales. We think weak markets will last through the first half of 2024, but that TE can grow modestly in fiscal 2024 and see much more meaningful growth and margin expansion in fiscal 2025. We see shares as undervalued.

In 2022, battery electric vehicles represented nearly 10% of global auto sales, up from a little less than 6% in 2021. Much of the growth occurred in China, which has been a leader in EV sales over the past decade. However, with national EV subsidies in China expiring in 2022 and far lower sales in the U.S. and Europe, the market questions if EV sales can continue to grow without subsides.

We increased our fair value estimate for TE Connectivity to $128 per share from $125 after good fiscal third-quarter results led us to raise our short-term profitability assumptions. TE’s quarterly sales met guidance, but margins were above our expectations. The company has done well to improve its pricing to offset inflation; this is a testament to the sticky nature of its products, which also underpins our narrow moat rating. Transportation sales, the firm’s largest driver, showed continued strength and reflected TE’s strong position in electric vehicles. There are pockets of weakness, primarily due to industrial and data center customers digesting built-up inventory, but we think TE is executing nicely against that backdrop. We still see the shares as moderately overvalued, however, and would advise investors to wait for a pullback.

TE Connectivity designs and manufactures connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications industries. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives almost half of its revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

We maintain our $125 per share fair value estimate for narrow-moat TE Connectivity after it reported strong fiscal second-quarter results. Sales and earnings came in above our expectations, but our long-term forecasts are unchanged. TE benefited from lower-than-expected foreign-currency headwinds and some pockets of demand strength in the quarter that we don’t see as durable fundamental catalysts. Pricing was also a benefit, and we see this as a bright spot going forward. Demand continues to look healthy in the automotive and industrial markets, while the communications market remains challenging. We see shares as fairly valued, and would point investors to the more-discounted, moaty components names.

We maintain our $125 fair value estimate for narrow-moat TE Connectivity after fiscal first-quarter results were in line with our expectations. Demand in the transportation and industrial verticals looks healthy, but a correction among communications customers is weighing on results. TE is also continuing to deal with headwinds from inflation and a strong U.S. dollar, but we expect these to wane through fiscal 2023. We expect TE’s end market backdrop to be modestly soft in fiscal 2023, but we remain confident in long-term drivers like the electric vehicle transition, where we see the firm’s position as strong. We see shares as fairly valued.

We are maintaining our $125 fair value estimate for narrow-moat TE Connectivity after the company closed out its fiscal-year 2022 with a strong fourth quarter that exceeded our expectations but provided a tempered outlook heading into the first quarter of fiscal 2023. Inflationary pressures, supply chain challenges, and foreign exchange headwinds persist. Though we expect these to impact TE’s results in the short term, we maintain our long-term thesis that TE is poised for growth rooted in increased vehicle electrification and content growth per vehicle. TE’s sticky position in applications like electric vehicles underpins our narrow economic moat rating, and we believe fleet electrification will continue mostly unabated even in a softer macroeconomic environment. We believe the disappointing first-quarter outlook and investor uncertainty sent shares down over 6% after results. We now view shares as slightly undervalued but advise seeking a greater margin of safety to invest.

TE Connectivity is a designer and manufacturer of connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications verticals. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives almost half of revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

We are maintaining our $125 fair value estimate for narrow-moat TE Connectivity after the company reported strong top- and bottom-line results for its fiscal third quarter. While TE continues to face supply chain challenges and foreign exchange headwinds, we think these headwinds are being navigated well, indicated by a strong book-to-bill ratio of 1.02 in the quarter, and continued pricing increases to aid in offsetting inflationary pressures. Our long-term thesis of growth stemming from increased vehicle electrification and content expansion was reaffirmed with management expecting electronic vehicle production to be up more than 30% for the year while the total automotive production environment expected to remain flat. Although we are encouraged by the continued electrification trend, we view shares of the company as fairly valued.

TE Connectivity is a designer and manufacturer of connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications verticals. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives almost half of revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

TE Connectivity is a designer and manufacturer of connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications verticals. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives almost half of revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

We’re maintaining our $125 fair value estimate for narrow-moat TE Connectivity after the company reported strong fiscal second-quarter results. We think TE is executing well against headwinds like supply constraints and inflation. Even as these are expected to weigh on fiscal third-quarter results, we see our long-term thesis playing out. We continue to look for end-market outperformance—particularly in automotive—and order growth as fundamental indicators for TE’s performance and have been pleased with both through the first half of fiscal 2022. After spending much of the last 12 months at a premium to our fair value estimate, the shares now appear fairly valued following a pullback in 2022.

Narrow-moat TE Connectivity opened fiscal year 2022 with first-quarter results outpacing guidance and our expectations on both the top and bottom line, and we’re raising our fair value estimate to $125 per share, from $120 previously. TE continues to face headwinds with supply chain constraints worse than 90 days ago. TE’s largest end market, automotive, was down 7% year over year with management noting $100 million in pushed out sales due to supply constraints. Strong momentum in both the Industrial Solutions (IS) and Communications Solutions (CS) segments propelled the top line, with 20% and 40% revenue growth year over year, respectively. Within CS, first quarter order growth was helped by a pulling-in of demand from cloud and data center customers that are placing orders beyond the first quarter due to supply chain uncertainty. We believe market uncertainty regarding global automotive production sent shares down 3% following the release, but our long-term view of content growth due to increased electrification and connectivity for TE remains unchanged. We continue to view shares as moderately overvalued.

TE Connectivity is a leading designer and manufacturer of connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications verticals. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives more than 40% of revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

Narrow-moat TE Connectivity closed out a stellar fiscal 2021 with a fourth quarter matching our expectations, and we maintain our fair value estimate of $120 per share. TE managed to meet its top line guidance despite supply-constrained automotive revenue as strong spending from industrial and cloud customers picked up the slack. We expect supply constraints to continue hampering the automotive end market—TE’s largest—in the short term, but think the firm’s ability to outperform its underlying markets with content growth will alleviate the effect on TE’s financials. We also forecast the rest of TE’s end markets to grow in fiscal 2022 as it digests the impressive backlog it built up in fiscal 2021. We think market uncertainty about automotive production challenges sent shares down 3% following the release, but our long-term view for content growth from increasing electrification and connectivity to spur strong outperformance across TE’s end markets is unchanged. Nevertheless, we continue to view shares as overvalued.

TE Connectivity is a leading designer and manufacturer of connectors and sensors, supplying custom and semicustom solutions to a bevy of end markets in the transportation, industrial, and communications verticals. TE has maintained a leading share of the global connector market for the last decade, specifically dominating the automotive connector market, from which it derives more than 40% of revenue. While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities for TE to sell into new vehicle sockets, like an onboard charger or advanced driver-assist system.

Narrow-moat TE Connectivity reported fiscal third-quarter results above guidance and our expectations, and we’re bumping our fair value estimate up to $120 per share from $115 previously. TE set a quarterly sales record as it continues to benefit from a broader market recovery and cited particular outperformance in electric vehicles, cloud capital expenditures, and factory automation. We’re pleased to see continued content growth in these areas, and TE’s ability to sell into new sockets for cutting-edge applications like onboard charging and data centers is a key tenet of our narrow moat rating for the firm. We think TE is poised to close out fiscal 2021 with more double-digit year-over-year growth but shares remain rich, and investors should wait for a pullback.