TELEDYNE TECHNOLOGIES INC (TDY)·Q3 2025 Earnings Summary

Executive Summary

• Record Q3 revenue of $1.54B (+6.7% YoY) and record non-GAAP EPS of $5.57; both exceeded S&P Global consensus, with revenue +$12M vs $1.528B* and EPS +$0.99 vs $4.58* .
• FY 2025 EPS guidance raised: GAAP to $17.83–$18.05 (from $17.59–$17.97) and non-GAAP to $21.45–$21.60 (from $21.20–$21.50); Q4 guidance set at GAAP $4.76–$4.98 and non-GAAP $5.73–$5.88 .
• Bookings hit a quarterly record, supported by Teledyne FLIR backlog growth; free cash flow was a record $313.9M and leverage fell to 1.4x, strengthening balance sheet optionality for M&A and repurchases .
• Segment mix: A&D Electronics +37.6% (acquisitions +$69M; organic defense strong), Digital Imaging +2.2% (industrial machine vision turning), Instrumentation +3.9%, Engineered Systems −8.1% (tough comp) .
• Key narrative drivers: Defense momentum (unmanned air/ground/subsea), recovering short-cycle commercial businesses, and proactive R&D investments; near-term caution on U.S. government shutdown and China “unreliable entity” designation impact expected to be limited .

What Went Well and What Went Wrong

What Went Well

• “Record quarterly sales, non-GAAP earnings per share and free cash flow… total company new orders were also a quarterly record due in part to continued backlog growth at Teledyne FLIR” .
• Defense momentum: A&D Electronics net sales +37.6% with non-GAAP operating income +36.8%; incremental $69M defense sales from acquisitions; unmanned systems strong (loitering munitions, counter-UAS) .
• Industrial machine vision turning up: “first quarter in two years” where DALSA and e2v collectively increased; book-to-bill 1.12x; sensors/cameras up YoY; targeted R&D supports high-end oscilloscopes and sensor leadership .

What Went Wrong

• GAAP EPS down YoY ($4.65 vs $5.54), primarily due to lapping FLIR tax benefit in prior year (2024 included $61.7M income tax benefits) .
• Digital Imaging margins modestly lower YoY on higher R&D (+90 bps) and cost reduction expenses (not excluded from non-GAAP), with severance/consolidation costs recognized .
• Engineered Systems revenue −8.1% on lower engineered products and energy systems; instrumentation book-to-bill sub-1 in marine (lumpiness), and continued OEM destocking in commercial aerospace .

Financial Results

Segment performance

KPIs and balance sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Given our strong third quarter performance, recovering commercial short-cycle businesses, and robust backlog growth, we are raising our full year earnings outlook.” — Robert Mehrabian, Executive Chairman .
• “In Digital Imaging, third-quarter sales increased 2.2%… unmanned systems, counter-unmanned air systems, and infrared components and subsystems were the strongest performers.” — George Bobb, President & CEO .
• “Overall book-to-bill ratio was 1.09.” — George Bobb (segment ratios: DI 1.12, Instrumentation ~0.9, A&D ~0.84, Engineered Systems >2x) .
• “We don’t expect much impact [from the U.S. government shutdown] unless it stretches for months.” — Robert Mehrabian .
• “Our current balance sheet is the strongest in years… providing the capacity to pursue acquisitions or stock repurchases.” — Robert Mehrabian .

Q&A Highlights

• Digital Imaging margins: Lower on higher R&D and restructuring; management targets margin recovery with cost actions; sees 2024/2025 levels achievable and improving in 2026 with mix and cost-out .
• Defense pipeline: Near-term awards in OPFL loitering munition (tens of millions) and initial LASSO (millions and growing); strong subsea demand (gliders, AUVs) in Black Sea/Baltic/APAC .
• Commercial aerospace: OEM destocking likely into most of 2026; aftermarket stable; 737 rate hike benefit limited next year but orders placed for 2026 .
• China/regulatory: FLIR LLC designated “unreliable entity”; minimal revenue exposure (<0.4% of sales) expected impact limited .
• Cost vs capability in unmanned: Management prioritizes accuracy and capability; positioning for volume with competitive cost structures (e.g., Rogue One quadcopter, nano drones) .

Estimates Context

Values retrieved from S&P Global.*
Implications: TDY delivered broad-based beats on revenue and normalized EPS in Q1–Q3, with the most notable upside in Q3 EPS (+$0.99 vs consensus*). EBITDA tracking slightly above consensus in Q2 and modestly below in Q3*.

Key Takeaways for Investors

• Non-GAAP EPS and revenue momentum with consistent beats vs consensus in 2025 YTD; Q3 showcased the strongest EPS delta vs expectations* .
• Defense exposure and unmanned systems (air/ground/subsea) are central growth engines; near-term awards could sustain book-to-bill >1 and backlog expansion .
• Industrial machine vision is stabilizing and recovering; targeted R&D in protocol analyzers/oscilloscopes and sensors should support margin normalization in Digital Imaging .
• Balance sheet flexibility increasing (FCF >$300M; leverage 1.4x), enabling accretive tuck-ins (TransponderTech completion) and potential buybacks .
• Watch near-term risks: U.S. government shutdown timing and OEM destocking in commercial aerospace; management expects limited shutdown impact unless prolonged .
• Guidance raised for FY 2025 (GAAP and non-GAAP); Q4 EPS guide implies continued operational strength into year-end .
• Trading lens: Defense backlog/orders and guidance raise are near-term catalysts; evidence of machine vision recovery and margin trajectory in DI will shape medium-term multiple re-rating .

Additional Q3 2025 Press Releases of Note

• Completed acquisition of TransponderTech from Saab, expanding maritime communications (AIS/VDES/GNSS) within FLIR Marine .
• MTU Maintenance partnership enhances engine health monitoring via Teledyne Controls’ DDS and GroundLink® Comm+ .
• FLIR Defense unveiled SkyCarrier™ autonomous UAS launch/recovery platform (drone-in-a-box) for on-the-move operations .