• Fourth Quarter Revenue: $4.1 billion, up 2% organically year-over-year.
• Fourth Quarter Adjusted Earnings Per Share (EPS): $1.95, up 10% versus the prior year.
• Fourth Quarter Adjusted Operating Margin: 18.6%, up 130 basis points over last year.
• Fourth Quarter Free Cash Flow: Approximately $830 million.
• Full Year Revenue: $15.8 billion.
• Full Year Adjusted EPS: $7.56, up 12% versus the prior year.
• Full Year Adjusted Operating Margin: 18.9%, expanded 220 basis points over 2023.
• Full Year Free Cash Flow: Approximately $2.8 billion.
• Transportation Segment Adjusted Operating Margin: 19.3% in Q4; 20% for the full year, up 300 basis points year-over-year.
• Communications Segment Organic Growth: 35% in Data and Devices business.
• AI Revenue: $300 million in fiscal 2024, expected to double in fiscal 2025.
• Share Repurchase Program Increase: $2.5 billion authorized.

• Warning! GuruFocus has detected 10 Warning Signs with FE.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TE Connectivity PLC (NYSE:TEL) delivered revenue and adjusted earnings per share ahead of guidance, driven by solid execution across segments.
• The company achieved record operating margins, earnings per share, and free cash flow for fiscal 2024.
• TE Connectivity PLC (NYSE:TEL) benefited from strategic positioning in electrification, data connectivity, renewable energy, and aerospace and defense markets.
• The company announced a $2.5 billion increase to its share repurchase program, reinforcing its value creation model.
• Strong performance in the Communications segment, with AI-related sales exceeding expectations and expected to double in fiscal 2025.

Negative Points

• Global auto production was flat in fiscal 2024, with declines expected in fiscal 2025, particularly impacting Western markets.
• Ongoing weakness in factory automation and building automation, especially in Europe, affecting the Industrial segment.
• Commercial transportation markets continue to decline, with potential improvement not expected until later in 2025.
• Currency exchange and tax headwinds impacted adjusted earnings per share by $0.39.
• The Sensors business faced declines due to market weakness and portfolio optimization efforts, with exits expected to continue into 2025.

Q & A Highlights

Q: Can you expand on the AI opportunity and its impact on TE Connectivity's growth? A: Terrence Curtin, CEO, explained that the AI trend demands excellent engineering, focusing on higher speed and lower latency. TE Connectivity's design wins and cloud CapEx spending are driving growth, with AI sales expected to double to $600 million in fiscal 2025. The company is well-positioned with a broad customer base, including hyperscalers and semiconductor companies, and anticipates AI to be a significant growth driver next year.

Q: How is TE Connectivity positioned in the automotive market in Asia, particularly China? A: Terrence Curtin, CEO, highlighted that Asia, especially China, is a major revenue region for TE Connectivity, with significant growth in electric vehicles (EVs) and data connectivity in vehicles. The company has strong relationships with both multinational and local Chinese OEMs, allowing it to outperform in content growth. TE Connectivity is expanding its operations in China to support this growth.

Q: What are the expectations for the new segment structure and margin expansion? A: Heath Mitts, CFO, stated that the new Industrial segment, combining Communications and Industrial segments, is expected to improve margins in fiscal 2025. The Transportation segment is anticipated to maintain margins around 20%. The goal is to achieve a 20% margin for the entire company over the midterm, driven by growth opportunities and cost management.

Q: What is the outlook for the commercial vehicle market and its impact on margins? A: Terrence Curtin, CEO, noted that the commercial vehicle market, including heavy trucks and construction, has weakened. However, TE Connectivity has managed to grow better than the market decline. Heath Mitts, CFO, added that while the softness impacts margins, the Transportation segment is expected to maintain margins at 20% or better, with potential improvement as the market recovers.

Q: How is the Data and Devices business performing outside of AI applications? A: Terrence Curtin, CEO, mentioned that the cloud element of the Data and Devices business is returning to growth, with expectations of mid-single-digit growth next year. Enterprise remains stable, and while TE Connectivity does not play largely in telecom networks, the recovery in cloud spending outside of AI is a positive sign for the business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.