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Teledyne shares rise after first earnings report since Flir acquisition

By   /   Thursday, July 29th, 2021  /   Comments Off on Teledyne shares rise after first earnings report since Flir acquisition

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Teledyne Technologies crushed analysts’ expectations July 28, delivering revenue in the second quarter of 2021 that doubled its total from the same quarter a year ago, thanks in large part to its acquisition of Flir systems, an Oregon based company with significant operations in Goleta.

Teledyne, a Thousand Oaks-based industrial and scientific conglomerate, generated $1.12 billion in revenue in the second quarter of 2021, a 50.8% increase from the same quarter of 2020. That beat Zacks’ Consensus Estimate projections by 11.6%. Flir accounted for $301.4 million of Teledyne’s revenue in the quarter, according to an earnings report released before the market opened July 28.

Net income was down, though Teledyne attributed that solely to costs relating to the Flir acquisition, which closed during the second quarter.

Teledyne’s net income for the quarter was 30.9% below its total from a year before, at $64.7 million, or $1.48 per share.

Excluding the transaction costs and other non-recurring charges, Teledyne generated non-GAAP earnings of $201 million, or $4.61 per share. Those charges included $42.3 million of transaction and integration-related costs, $52.2 million for the settlement of Flir employee and director stock awards, $22.8 million in acquired intangible asset amortization expense and $23.4 million in acquired inventory step-up expense.

“The second quarter was truly a record for Teledyne with sales, operating margin and earnings excluding acquisition related costs,” Teledyne President Robert Mehrabian said during the company’s earnings call.

Teledyne shares closed at $456.07 on July 28, up 3.9% from the day before. Since the start of this year, Teledyne’s stock has soared more than 25%.

Teledyne announced it would be acquiring Flir on Jan. 4 in a deal worth $8.2 billion. It was one of the biggest acquisitions in recent years by a tri-county-based company. The deal closed May 14.

Since then, Mehrabian said Teledyne has been focused on implementing Flir’s processes quickly and efficiently.

“Our recent acquisition of Flir accelerates Teledyne’s evolution into a more attractive, high-margin industrial technology company, while at the same time maintaining our balanced portfolio, primarily focused on commercial markets, but with a resilient and predictable backbone of government businesses,” Mehrabian said.

According to Mehrabian, 75% of Teledyne’s sales were derived from private U.S. and international consumers, while the remaining 25% were from U.S. government contracts.

Flir specialized in thermal imaging and now operates under Teledyne’s digital imaging segmentation as Teledyne Flir. Because of that, Teledyne’s digital imaging segmentation saw the biggest year-over-year leap of any of its business units, as revenue jumped 143.9% to $579.5 million in the second quarter of 2021.

Mehrabian said he expects Flir to add just under $1.3 billion in sales in the digital imaging segment, which is now expected to generate $4.5 billion in fiscal year 2021.

Mehrabian also said his goal is to “reduce our debt as fast as we can” thanks to the extra cash coming in from Flir.
Teledyne had debts of $4.7 billion at the end of the second quarter. Mehrabian said the hope is to get that debt down to $3.3 billion by the end of the fiscal year. The company also has $695.1 million in cash and cash equivalents.

“Our immediate task is to generate cash and pay down our debt. Having said all of that, we do have the capacity to make smaller acquisitions that we’ve done historically and we would do that if such opportunities arise,” Mehrabian said.

The company has also increased its guidance for earnings per share in both the third quarter and full year due. Teledyne believes earnings per share will be in the range of $2 to $2.15 in the third quarter and $8.05 to $8.45 for the full year. Excluding costs from the Flir acquisition, Teledyne believes it will deliver non-GAAP earnings per share of $3.55 to $3.65 in the third quarter and $15.25 to $15.50 for the full year.

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