Why TE Connectivity Stock Plummeted This Week
Key Points
TE Connectivity reported better-than-expected fiscal Q2 results, but sales fell $20 million short of expectations.
TE also guided for better-than-expected earnings in the current quarter, but some investors were looking for stronger sales guidance.
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TE Connectivity (NYSE: TEL) stock got hit with a substantial valuation pullback this week following the company's latest quarterly release. Amid the backdrop of a 0.5% gain for the S&P 500 and a 1.5% jump for the Nasdaq Composite, the company's share price fell 12.8% over the stretch.
On April 22, TE published results for the second quarter of its current fiscal year -- a period which ended March 27. Despite the sell-offs this week, the stock is still up roughly 50% over the last year.
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TE stock slumped on mixed Q2 results
TE Connectivity notched non-GAAP (adjusted) earnings of $2.73 per share on sales of $4.74 billion in fiscal Q2. While earnings per share came in $0.03 ahead of the average analyst forecast, the company's sales in the period were $20 million lower than the consensus forecast. Contributions from acquisitions helped push overall revenue up roughly 14.5% year over year, and organic revenue increased 7% compared to the prior-year period -- but investors had a negative reaction to the sales shortfall relative to Wall Street's forecast.
What's next for TE Connectivity?
Like the company's fiscal Q2 report, the company's guidance for the current quarter was somewhat of a mixed bag. Guidance for adjusted earnings of roughly $2.83 topped the average analyst estimate's target for adjusted earnings of $2.79, but the company's guidance for year-over-year sales growth of roughly 10% in the quarter suggests a meaningful sequential deceleration.
On the other hand, guidance for organic revenue growth of 9% year over year in the quarter actually represents a meaningful step up over fiscal Q2's figure. TE's Q2 report and guidance actually looked pretty solid, but have expectations have been raised on the heels of the stock's run-up over the last year.
Should you buy stock in TE Connectivity right now?
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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