The release of its first-quarter earnings by Teledyne Technologies Inc. sent its stock price down. The shares of the Thousand Oaks aerospace, marine and digital imaging products manufacturer declined by about 11% on April 24 when it closed at $362.50, down from the previous day’s closing price of $407.06.
On April 25, the stock price climbed 4% to close at $376.98.
The company reported before the market opened on April 24 adjusted net income of $218 million ($4.55 a share) for the quarter ending March 31, a slight increase from the adjusted net income of $217 million ($4.53) in the same period the previous year. Revenue decreased by 2.4% from the first quarter of the prior year to $1.35 billion.The earnings and revenue figures fell short of what Wall Street anticipated, as analysts on average expected earnings of $4.63 on revenue of $1.39 billion, according to LSEG, a provider of financial markets data.
The number of shares traded on April 24 reached just about 1.1 million, the highest volume for the past 52 weeks. That outpaced the previous high volume of 925,100 reached on May 31.
Strong orders reported in earnings call
In a conference call from April 24 with analysts to discuss the first-quarter financials, Teledyne Executive Chairman Robert Mehrabian said he was pleased with the results, which included record adjusted earnings per share and record free cash flow of $275 million.
While overall orders remained strong, sales were impacted by deterioration in some of the company’s short cycle imaging and instrumentation markets, Mehrabian said.“We have previously assumed no full year sales growth in industrial automation as well as in the test and measurement markets. However, those markets weakened more than planned in the first quarter, and we now forecast full year sales in those product families to decline meaningfully (this year),” Mehrabian said during the call. “Nevertheless, we believe such sales declines with the offset by our marine, aviation and certain defense businesses, resulting in full year flat sales compared to (last year).”
Teledyne revised its outlook for the full year when it came to earnings per share.
For all of this year, the company expects adjusted earnings per share of $19.25 to $19.45, compared with a prior call for $20.35 to $20.68. Analysts expected $20.56, according to LSEG.
For its second quarter, Teledyne expects adjusted earnings between $4.40 and $4.50, lower than analysts’ expected $5 a share.
During the call, Mehrabian said that Teledyne had renewed its stock repurchase authorization and that it planned on beginning to buy back shares during the second quarter.
“At the same time, because of our strong balance sheet, we’re continuing to evaluate a number of acquisition opportunities,” Mehrabian added.
Jim Ricchiuti, an analyst with Needham & Co. LLC, asked during the conference call about the mergers and acquisitions pipeline and if Merhrabian was seeing more opportunities for smaller deals than for larger ones.
“Is that a fair way to characterize the environment right now?” Ricchiuti asked.
Mehrabian said it was, explaining that the company had one acquisition in its pipeline currently and when that deal is completed the company would have spent more than $300 million in acquisitions since it bought Flir in May 2021 for $8.2 billion.
“We can spend up to $1.5 billion, $2 billion (on acquisitions) because we haven’t touched our line of credit at all and we have cash
on hand. So we are looking at acquisitions,”
whe said.
“The issue is that smaller acquisitions, we may be able to complete this year,” Mehrabian added. “Larger acquisitions, even if we find one, with all the various regulatory hurdles that you have to go through, won’t happen until next year.”