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TELEDYNE TECHNOLOGIES INC (TDY)·Q4 2024 Earnings Summary

Executive Summary

  • Record Q4 sales of $1.502B (+5.4% y/y) and record non-GAAP EPS of $5.52; GAAP EPS fell to $4.20 on a $52.5M non-cash trademark impairment and acquisition amortization .
  • Segment performance was broad-based: Instrumentation +10.1% y/y revenue with record non-GAAP margins; A&D Electronics +6.8%; Digital Imaging +2.5% (FLIR strength offsetting machine vision weakness); Engineered Systems +11.0% revenue but profit down on program cost estimates .
  • FY25 outlook issued: GAAP EPS $17.70–$18.20 and non-GAAP EPS $21.10–$21.50; Q1’25 GAAP EPS $3.90–$4.04 and non-GAAP $4.80–$4.90 . Management targets ~3.2% organic growth and ~70–80 bps non-GAAP margin expansion in 2025, while cautioning about a 1.3% FX headwind .
  • Cash generation remains a key catalyst: Q4 operating cash flow $332.4M, free cash flow $303.4M; FY24 free cash flow a record $1.108B; net debt reduced to ~$2.0B and leverage ~1.5x; M&A pipeline active (Micropac closed Dec 30; Excelitas carve-out expected Q1) .
  • Estimates context: S&P Global consensus data could not be fetched at time of query; beat/miss vs Street cannot be assessed. Values would be retrieved from S&P Global if available.

What Went Well and What Went Wrong

  • What Went Well
    • “We achieved all-time record sales and non-GAAP earnings per share” with year-over-year growth accelerating on improving short-cycle businesses and strong demand in defense, space, and energy .
    • Instrumentation delivered 10.1% y/y revenue growth and a record non-GAAP margin (29.1% per call), driven by marine instrumentation strength and favorable mix .
    • FLIR Defense growth and backlog underpinned Digital Imaging; management highlighted healthy growth across commercial and defense infrared imaging, counter-UAS, and maritime systems .
  • What Went Wrong
    • GAAP EPS declined y/y to $4.20 due to a $52.5M non-cash trademark impairment and $49.7M amortization; Digital Imaging GAAP operating income fell 32.4% y/y (non-GAAP was +3.1%) .
    • Engineered Systems operating income declined 20.3% y/y on $2.9M unfavorable contract estimate changes in EMS programs .
    • Machine vision and dental X-ray markets remained weak; legacy commercial imaging recovery slower than expected, with cautious inventory behavior and China effects cited .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$1,374.1 $1,443.5 $1,502.3
GAAP Diluted EPS ($)$3.77 $5.54 $4.20
Non-GAAP Diluted EPS ($)$4.58 $5.10 $5.52
Operating Margin (GAAP, %)18.0% 18.8% 15.8%
Operating Margin (Non-GAAP, %)21.6% 22.5% 22.7%
SegmentQ4 2023 Net Sales ($M)Q4 2024 Net Sales ($M)Q4 2023 Operating Income ($M)Q4 2024 Operating Income ($M)
Digital Imaging$802.5 $822.2 $134.3 $90.8
Instrumentation$335.2 $368.9 $90.7 $100.8
Aerospace & Defense Electronics$184.0 $196.5 $50.0 $56.4
Engineered Systems$103.3 $114.7 $12.3 $9.8
KPIQ4 2023Q4 2024
Cash from Operations ($USD Millions)$164.4 $332.4
Capital Expenditures ($USD Millions)$40.2 $29.0
Free Cash Flow ($USD Millions)$124.2 $303.4
Net Debt ($USD Millions, period-end)$2,596.6 $1,999.2

Non-GAAP adjustments (Q4 2024): excluded $49.7M amortization, $52.5M trademark impairment, $1.5M transaction/integration; also removed $16.6M FLIR-related tax benefits in EPS reconciliation .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP Diluted EPSQ1 2025N/A$3.90–$4.04 Newly issued
Non-GAAP Diluted EPSQ1 2025N/A$4.80–$4.90 Newly issued
GAAP Diluted EPSFY 2025N/A$17.70–$18.20 Newly issued
Non-GAAP Diluted EPSFY 2025N/A$21.10–$21.50 Newly issued
Organic Sales Growth (%)FY 2025N/A~3.2% (3.2% organic; ~1% from acquisitions) Newly disclosed
Non-GAAP Operating Margin (bps)FY 2025N/A+70–80 bps vs FY24 per management Newly disclosed
FX ImpactFY 2025N/A~1.3% headwind assumed Newly disclosed
Free Cash FlowFY 2025N/A“Over $1B” targeted Newly disclosed
Dividend PolicyFY 2025No dividendNo change; preference for M&A/buybacks Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Short-cycle commercial recovery (machine vision, T&M)Machine vision down ~20% y/y; signs of stabilization; T&M down ~10% with cost actions; cautious CapEx in oscilloscopes “Sales stabilized or recovering”; record orders; sequential growth across segments Legacy imaging recovery slower; machine vision improving gradually; T&M sequential improvement third straight quarter Improving but mixed
FLIR Defense & unmanned systemsStrength in defense IR, backlog; product wins (Black Hornet 4, loitering munition ROC-1) Defense, space strong; A&D up y/y FLIR defense grew ~9% in Q4; backlog healthy; ~6% growth expected in 2025 Strong/positive
Marine instrumentation & offshore energyMarine +16% y/y; strong offshore energy and subsea defense Marine drove segment growth; favorable mix/margins Marine sales +$29.9M; margins improved; segment set record non-GAAP margin Strong/positive
FX and tariffs/macroNoted macro difficulties; strong backlog Easing comps; macro risk disclosures Assuming ~1.3% FX headwind; tariffs manageable vs 2022 supply chain impact Cautious headwind
Capital allocation & M&ADebt maturity paid; repurchases; acquisitions (Valeport, Adimec) Repurchases ~$354M; leverage 1.7x; pipeline improved Micropac closed; Excelitas carve-out expected Q1; record FCF; leverage 1.5x Active/positive
Healthcare/dental imagingMixed: cancer radiotherapy resilient; dental X-ray weaker Not highlightedContinued weakness in dental detectors; resilience in some health verticals Mixed/negative in dental

Management Commentary

  • Strategy and portfolio mix: “Year-over-year growth accelerated, as our shorter-cycle businesses improved throughout 2024 coupled with strong demand in our longer cycle defense, space, and energy businesses” .
  • 2025 growth and margin outlook: “We believe 2025 sales may grow approximately 4%, with non-GAAP earnings double that amount at approximately 8%... prudent to be a bit cautious… given the very strong U.S. dollar” .
  • Segment growth assumptions: Instruments ~3.8% organic; Digital Imaging ~2.8% organic (FLIR ~3.9%); A&D ~4% organic (8% including Micropac); Engineered Systems ~2.3% .
  • Margin trajectory: “We finished the year at 22%. We expect that to grow by 80 bps… Digital Imaging… ~70–80 bps” .
  • Capital allocation: “Given over $1.1 billion of free cash flow in 2024, our balance sheet capacity is the highest in years, and our M&A pipeline remains healthy” .

Q&A Highlights

  • Organic growth composition and acquisitions: ~3.2% organic; ~1.1% from acquisitions (Micropac, Valeport, Adimec) to ~4.2% total; Excelitas would add ~$15M/month in revenue post-close .
  • Margin expansion drivers: Company non-GAAP margin +~80 bps expected; Digital Imaging +~70–80 bps; instrumentation margin growth moderating after strong gains 2022–2024; Micropac initially dilutive to A&D margins .
  • Orders and book-to-bill: Company ~1.04 in Q4; Instruments 1.12 (marine 1.23), FLIR 1.03; legacy imaging 0.97; A&D 0.96; Engineered Systems 1.16 .
  • Macro/tariffs and FX: Management expects tariff impacts less than 2022 supply chain peak; FX headwind assumed ~1.3% for 2025 .
  • Free cash flow and dividend: FY25 FCF target “over $1B”; management favors M&A and buybacks over initiating a dividend .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 (EPS, revenue) were unavailable at time of query due to API quota limits; beat/miss vs Street cannot be assessed. Values would be retrieved from S&P Global if available.
  • Actual reported: Revenue $1.502B; GAAP EPS $4.20; non-GAAP EPS $5.52; operating margin 15.8% GAAP / 22.7% non-GAAP .

Key Takeaways for Investors

  • Mix shift is favorable: strong defense and marine instrumentation offset lingering weakness in machine vision and dental imaging; watch FLIR Defense backlog conversion and marine orders as near-term drivers .
  • Margin resilience: despite GAAP impacts from trademark impairments, non-GAAP margins improved sequentially; 2025 plan embeds further expansion; execution in Digital Imaging (FLIR) critical .
  • Cash generation supports optionality: record FY24 FCF and lower net debt (~$2.0B) enable continued M&A (Excelitas closing) and opportunistic buybacks—potential catalysts for multiple and EPS .
  • Guidance signals steady growth: 2025 EPS ranges, ~3.2% organic growth, and ~70–80 bps margin expansion suggest durable trajectory, tempered by a 1.3% FX headwind .
  • Segment watch items: monitor Engineered Systems program cost performance after Q4 estimate changes; assess Micropac margin impact in A&D and Excelitas integration pacing .
  • Tactical considerations: near-term stock catalysts include Excelitas close, defense contract awards (loitering munition, Black Hornet 4, FWS programs), and evidence of short-cycle recovery in machine vision/test & measurement .
  • Non-GAAP adjustments matter: headline GAAP EPS volatility from impairments and tax items can obscure underlying performance; focus on non-GAAP EPS/margins and cash flow to gauge core trajectory .