Despite a dip in earnings and sales compared to last year, Teledyne Technologies beat analysts’ expectations with net income of $93.9 million in the third quarter, the company announced Oct. 21.
Analysts estimated that Teledyne’s diluted earnings per share would be $2.36 in the third quarter, according to estimates compiled by the Wall Street Journal. Instead, Teledyne, a Thousand Oaks based industrial and scientific conglomerate, reported diluted earnings per share of $2.48.
“Despite the market turmoil and lower sales in 2020, we have successfully demonstrated gap margin improvement. For example, the second quarter gap operating margin increased sequentially over 150 basis points,” Robert Mehrabian, Teledyne’s executive chairman, said on a company earnings call.
Teledyne’s stock dropped after the earnings announcement, going from an opening share price of $340 to $331 by mid-afternoon.
Teledyne saw a year-to-year decrease of 12 percent in net income, down from $106.7 million in the third quarter of 2019.
Teledyne also reported net sales of $749 million, a decrease of 6.6 percent compared to third quarter 2019.
The company also had a record third quarter with free cash flow of $135.1 million and $330.5 million for the first three quarters of the fiscal year.
Total costs and expenses were down from third quarter last year, from $673.5 million in 2019 to $626.5 million in 2020. The company’s operating margin was at 16.4 percent in the most recent quarter, the second highest mark in company history, Mehrabian said.
As of Sept. 27, Teledyne has cash and cash equivalents of $454.4 million and a total debt of $786.7 million.
“Our balance sheet has never been stronger and our acquisition pipeline is healthy,” Mehrabian said. “As the overall demand environment continues to improve, our substantially lower cost structure should provide significant operating leverage in future quarters. … Coupled with acquisitions, we expect earnings and cash flow to continue compounding for years to come.”
Net sales in Teledyne’s instrumentation segment were $263.5 million, down 6.9 percent from a year earlier, while operating income in the segment was down 2.5 percent to $50.7 million.
In digital imaging, Teledyne’s net sales were $239.7 million, down 1.8 percent, and operating income was u p10.4 percent, to $45.5 million.
Teledyne’s aerospace and defense electronics segment saw the biggest dip, with net sales of $144.8 million, a decrease of 18.2 percent from the third quarter of 2019. Operating income was $26.7 million, a decrease of 32.4 percent.
The company’s engineered systems saw a net sales increase of 2.9 percent from the third quarter of 2019, with $101 million. Operating income was at $12.5 million, an increase of 17.9 percent.
All of Teledyne’s manufacturing sites, the company’s corporate office and the research lab remain operational, with only 16.4 percent of all employees working from home.
Teledyne is also in the process of acquiring Photonis, a French aeronautics and defense company. Mehrabian said he hopes Teledyne can close the acquisition before the end of the year.
The company expects diluted earnings per share to be in the range of $2.56 to $2.86 for the fourth quarter, and full-year 2020 diluted earnings per share to be in the range of $9.70 to $10.00.