Sign in

    Teledyne Technologies Inc (TDY)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$407.06Last close (Apr 23, 2024)
    Post-Earnings Price$369.99Open (Apr 24, 2024)
    Price Change
    $-37.07(-9.11%)

    What went well

    • Teledyne's long-cycle businesses, including marine, defense, and space, are performing strongly with a robust backlog expected to drive revenue growth in the second half of the year.
    • The company has a strong balance sheet with low net debt and ample free cash flow, enabling significant share repurchases (authorized up to $1.25 billion) and acquisitions to enhance shareholder value.
    • Teledyne is proactively managing costs, having removed over $100 million in expenses, which is expected to maintain or improve margins even on lower revenues, positioning the company for increased profitability when markets recover.

    What went wrong

    • Teledyne significantly lowered its revenue guidance by $220 million, due to a surprising slowdown in industrial automation and unexpected issues in the Engineered Systems business.
    • The company has low visibility in short-cycle businesses and is not counting on improvements, especially in industrial automation, because they have no confidence in forecasting these areas.
    • Margins in key segments are declining, with FLIR business margins falling almost 200 basis points year-over-year and DALSA e2c margins at their lowest in a long time at 19.5% in Q1.

    Q&A Summary

    1. Guidance Cut and Company Outlook
      Q: Is Teledyne different after the rare guidance cut?
      A: Robert noted the guidance cut has happened only 4 times in the past 25 years. Unexpected weakness in industrial automation and a hit in Engineered Systems led to a $220 million revenue reduction. Despite this, Teledyne can better absorb shocks now due to its larger size, with revenue around $3.1 billion.

    2. M&A Pipeline and Capital Allocation
      Q: What's the plan for M&A and capital allocation?
      A: Teledyne's debt-to-EBITDA is at 1.7, expected to drop to 1.3 by year-end. They plan to repurchase shares, offsetting an increase of 700,000 shares since acquiring FLIR. With capacity to spend up to $1.5 to $2 billion, they aim for small acquisitions this year and larger ones potentially next year.

    3. Short-Cycle Business Weakness and Margins
      Q: How are short-cycle declines affecting margins?
      A: Gross margins are expected to stay relatively flat around 43% despite weakness in higher-margin short-cycle areas. They've removed nearly $100 million in costs, including $52 million last year and an additional $10 to $15 million early this year.

    4. Digital Imaging and Machine Vision Declines
      Q: What's happening in Digital Imaging and Machine Vision?
      A: Machine vision revenue is projected to decline by $120 million from approximately $600 million in 2023. Overall digital imaging revenue is expected to decrease by about 1.5%, impacting high-margin businesses. Long-cycle areas like space and defense are performing well.

    5. Buyback Plans and Leverage
      Q: Are buybacks included in guidance; what's the leverage outlook?
      A: Buybacks are not included in this year's guidance. Even after potential repurchases of $200 to $300 million, debt-to-EBITDA would remain below 1.5, under their target range of 1.5 to 2.5.

    6. Engineered Systems Margin Hit
      Q: What caused the Engineered Systems margin decline?
      A: A $7 million EBIT impact in Q1 due to higher-than-expected costs led to the margin decline. This is considered a one-time event, and they expect to fix it going forward.

    7. Supply Chain Improvements
      Q: Are supply chain conditions improving?
      A: Yes, significant improvements over 2022. Purchases from brokers dropped from about $1 billion last year's first quarter to just over $2 million this year, indicating better supply conditions.

    Related Publications