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TELEDYNE TECHNOLOGIES INC (TDY)·Q2 2025 Earnings Summary

Executive Summary

  • TDY delivered record net sales of $1.51B (+10.2% YoY) and record non-GAAP diluted EPS of $5.20; GAAP diluted EPS was $4.43, with GAAP/non-GAAP operating margins at 18.4%/22.2% .
  • Results materially beat Street: revenue $1.514B vs $1.476B consensus and non-GAAP EPS $5.20 vs $4.15; strong beat driven by defense electronics, marine instrumentation, and FLIR defense/industrial strength, with orders > sales for the 7th straight quarter . EPS/revenue beats vs consensus from S&P Global estimates: $5.20 vs $4.15 EPS; $1,513.7M vs $1,475.8M revenue; 5/9 estimates respectively*.
  • Guidance: raised FY25 GAAP EPS to $17.59–$17.97 (from $17.35–$17.83) and narrowed FY25 non-GAAP EPS to $21.20–$21.50 (from $21.10–$21.50); Q3 GAAP EPS guided to $4.39–$4.54; Q3 non-GAAP $5.35–$5.45 .
  • Capital allocation: leverage at 1.6x and buyback authorization increased to $2.0B, creating flexibility amid pricey M&A; management may prioritize repurchases when TDY is the “best value” versus acquisitions . Potential near-term caution flagged around short-cycle demand pull-forward and tariff uncertainty .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth and order strength: “sales grew organically in every segment, and orders exceeded sales for the seventh consecutive quarter,” with double-digit YoY increases in GAAP/non-GAAP EPS .
  • Segment performance: Defense electronics +36.2% revenue (A&D Electronics), marine instrumentation +$23.7M, environmental +$6.4M, and test & measurement +$4.0M; Digital Imaging saw growth in unmanned air systems and commercial IR components .
  • Strategic positioning and margin improvement: FLIR Defense margins now “over 20%” vs “just below 15%” at acquisition; acquisitions integrated with improving margins over time (Micropac, Qioptiq), following TDY’s playbook .

What Went Wrong

  • Short-cycle caution and possible pull-ins: management cited potential $15–$20M pull-forward mostly in short-cycle businesses, leading to a flat Q3 top-line sequential guide despite strong bookings .
  • Cash flow decline YoY: CFO fell to $226.6M (from $318.7M) and FCF to $196.3M (from $301.0M), primarily on higher income tax payments .
  • Mix/charges weighed on Digital Imaging non-GAAP margin modestly (severance and facility actions; unfavorable mix); DALSA/E2V margins down ~100 bps YoY from cost actions, offset by FLIR margin gains .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,374.1 $1,449.9 $1,513.7
GAAP Diluted EPS ($)$3.77 $3.99 $4.43
Non-GAAP Diluted EPS ($)$4.58 $4.95 $5.20
GAAP Operating Margin %18.0% 17.9% 18.4%
Non-GAAP Operating Margin %21.6% 22.0% 22.2%
Q2 2025 vs EstimatesConsensusActual
Revenue ($USD Millions)1,475.8*1,513.7
Primary EPS (non-GAAP, $)4.15*5.20
# of Estimates (EPS / Revenue)5 / 9*—

Values retrieved from S&P Global.*

Segment Net Sales ($USD Millions)Q2 2024Q2 2025
Digital Imaging739.4 771.0
Instrumentation333.5 367.6
Aerospace & Defense Electronics194.4 264.8
Engineered Systems106.8 110.3
Total1,374.1 1,513.7
Segment Operating Income ($USD Millions)Q2 2024Q2 2025
Digital Imaging113.5 119.6
Instrumentation87.2 101.6
Aerospace & Defense Electronics57.1 66.6
Engineered Systems7.5 12.1
Corporate Expense(18.3) (21.7)
Total Operating Income247.0 278.2
KPIs (Book-to-Bill)Q1 2025Q2 2025
Company Overall~1.1x ~1.1x (7th consecutive quarter)
Digital Imaging Overall1.02 ~1.1x; industrial/scientific 1.2x
FLIR Defense1.17 ~1.02
Instrumentation Overall1.04 ~0.97

Additional financials: CFO $226.6M; Capex $30.3M; FCF $196.3M; net debt $2,306.5M; leverage ratio 1.6x .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP Diluted EPSFY 2025$17.35–$17.83 $17.59–$17.97 Raised (low end)
Non-GAAP Diluted EPSFY 2025$21.10–$21.50 $21.20–$21.50 Narrowed/raised low end
GAAP Diluted EPSQ3 2025—$4.39–$4.54 New
Non-GAAP Diluted EPSQ3 2025—$5.35–$5.45 New
Stock Repurchase AuthorizationOngoing$0.896B remaining $2.0B new authorization Increased

No revenue/OpEx/tax guidance ranges provided; Q2 effective tax rate was 19.3% (discrete benefit $8.4M) .

Earnings Call Themes & Trends

TopicQ4 2024 (Prev-2)Q1 2025 (Prev-1)Q2 2025 (Current)Trend
Orders/BacklogAcceleration through 2024; record cash flow, balanced portfolio Orders > sales 6th straight quarter; all-time record backlog; ~$4B incl. Qioptiq Orders > sales 7th straight quarter; cautious near-term on short-cycle Positive momentum; cautious near-term
Tariffs/MacroFlagged tariff/geopolitical risks in outlook Modeled ~1% revenue impact; supply chain costs mitigation; pricing as needed Potential pull-ins; short-cycle caution; still mitigating and less cautious on demand impact Uncertain; mitigation ongoing
Digital ImagingGrowth in unmanned/IR; DI non-GAAP OI up DI +2.2% sales; non-GAAP margin +31 bps; sensors weak DI +4.3% sales; FLIR margins >20%; DALSA/E2V cost actions weighed Improving mix; cost actions
DefenseA&D strong; components strength A&D +30.6%; organic +7.8%; Qioptiq added backlog U.S. defense +12.5% YoY; foreign defense >15% YoY; strong unmanned portfolio Strengthening
Marine/InstrumentationQ4 marine +$29.9M; margins up Marine +9.5% sales; instrumentation margins +97 bps Marine +$23.7M; instrumentation margins +149 bps; test & measurement +5.5% Sustained growth
Capital AllocationRecord FCF; leverage 1.5x; M&A underway Two acquisitions closed; leverage 1.8x; pipeline healthy Leverage 1.6x; $2.0B buyback authorization; acquisitions pricey Flexible; opportunistic

Management Commentary

  • “Record quarterly sales… greatest total and organic sales growth in three years… orders exceeded sales for the seventh consecutive quarter. Both GAAP and non-GAAP EPS increased at double-digit rates.” — Robert Mehrabian .
  • “Digital Imaging book-to-bill 1.1x; bookings of 1.2x in industrial/scientific… Instrumentation margins up to 27.6% GAAP and 28.5% non-GAAP.” — George Bobb .
  • “FLIR Defense margins… when acquired just below 15%, today over 20%.” — Robert Mehrabian .
  • “We’re cautious… maybe $15–$20 million pulled in, mostly short-cycle.” — Robert Mehrabian .
  • “Board increased stock repurchase authorization from $896M to $2B… consider repurchases when TDY is best value.” — Robert Mehrabian .

Q&A Highlights

  • Short-cycle visibility: management’s flat Q3 top-line guide reflects caution about potential pull-ins and tariff uncertainty, despite healthy book-to-bill and strong long-cycle defense/space .
  • Digital Imaging margins: FLIR margin expansion offsets DALSA/E2V right-sizing costs; non-GAAP DI margin impact modest and viewed as transitory .
  • Defense growth breadth: U.S. defense +12.5% YoY; foreign defense >15% YoY; extensive unmanned systems portfolio across air/ground/subsea; European footprint supports in-country production .
  • Tariff impacts and mitigation: limited direct China exposure on sales; cost-side mitigation via USMCA/DoD exemptions and pricing; less cautious now on demand destruction than prior .
  • Capital allocation: acquisitions remain expensive (19–20x EBITDA cited in market), hence increased buyback optionality; leverage trending down on strong cash generation .

Estimates Context

  • Q2 2025 beat vs consensus: non-GAAP EPS $5.20 vs $4.15; revenue $1,513.7M vs $1,475.8M; # of estimates 5 (EPS) / 9 (Revenue).*
  • Implication: Street likely raises FY25 EPS (non-GAAP) within the narrowed guide ($21.20–$21.50) and adjusts Q3 on flat sequential revenue expectations due to short-cycle caution .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Robust beat and raised FY GAAP/non-GAAP EPS outlook should support estimate revisions upward; watch for any near-term volatility tied to flat Q3 revenue guide and tariff headlines .
  • Mix shift favors defense/marine/Test & Measurement; FLIR Defense margin trajectory >20% reinforces mid-term earnings quality .
  • Digital Imaging stabilization underway; DALSA/E2V cost actions depress margin near term, but FLIR strength offsets; bookings remain healthy (DI ~1.1x, industrial/scientific 1.2x) .
  • Strong balance sheet (1.6x leverage) and $2B buyback authorization provide downside support and capital deployment optionality amid expensive M&A markets .
  • Cash flow softness in Q2 from tax timing; structurally strong FCF generation persists (Q4 FY24 record levels) supporting deleveraging and buybacks .
  • Risks: tariff-driven cost inflation and short-cycle demand timing; management sees limited China revenue exposure and has identified cost mitigation/pricing levers .
  • Tactical: expect trading around guidance tone and short-cycle indicators; medium-term thesis anchored in defense/unmanned, marine energy, space sensing, and disciplined acquisition integration .

Appendix: Non-GAAP Adjustments

  • Q2 2025 specified items: intangible amortization $54.6M; transaction/integration $1.9M; inventory step-up $1.2M; FLIR tax benefit $7.7M; non-GAAP net income $246.3M; non-GAAP diluted EPS $5.20 .
  • Segment-level non-GAAP operating income impacts detailed in reconciliation (e.g., DI $46.3M amortization) .

Additional Q2 Press Releases

  • Black Hornet 4 added to DoD’s Blue UAS list; >33,000 units delivered across 45+ countries; supports defense adoption runway .
  • Teledyne FLIR OEM brand update and site launch emphasizing scale, vertical integration, and edge AI Prism software for OEMs .