Teledyne shares hit record after strong earnings report
The acquisition of Flir Systems continues to pay off for Teledyne Technologies, as the Thousand Oaks-based industrial and scientific conglomerate crushed analysts’ expectations in the third quarter and upped its guidance for the full year.
Teledyne delivered record sales for the quarter ended Sept. 30, generating $1.3 billion in revenue, a 75.8% increase from the same quarter a year ago, according to earnings released before the market opened Oct. 27. That beat Zacks’ Consensus Estimate projections by 1.43%.
The company’s net income increased 42.8%, from $94.9 million, or $2.48 per share, in the third quarter of 2020 to $134.1 million, or $2.81 earnings per share, in the third quarter of 2021.
Teledyne’s Non-GAAP earnings, which includes one time-costs including those associated with the Flir deal, were $4.34 per share, beating Zacks’ Consensus Estimate of $3.68 earnings per share by 17.9%.
Revenue growth was driven primarily from Teledyne’s digital imaging segment, Teledyne Flir, which includes the former Flir operations. Teledyne Flir accounted for 36.4% of Teledyne’s revenue in the quarter, or $473.6 million.
Flir, an Oregon-based company with some of its biggest operations in Goleta, specialized in thermal imaging. Due to the acquisition, Teledyne’s digital imaging segment saw the biggest year-over-year leap of any of its business units, as revenue jumped 217% to $760.6 million in the third quarter of 2021.
“Our record sales in the third quarter included organic growth just under 12%, and operating margin increased 380 basis points, excluding acquisition-related costs,” Robert Mehrabian, President and CEO of Teledyne, said in the company’s earnings release. “Our government businesses continued to grow, and we are beginning to see a recovery in some of our longer-cycle commercial markets such as aerospace and energy. We are also very pleased with the integration of Teledyne Flir, as well as its performance in the first full quarter as part of Teledyne.”
Teledyne’s stock rose nearly 5% during morning trading, with shares hovering around $455, a record high for the company. Since the start of the new year, Teledyne’s shares are up 26.
Mehrabian said during the company’s Oct. 27 earnings call that continuing to integrate Flir into continues to be a top priority for the company.
“We’ve integrated some of the businesses very quickly, such as mid-range vision systems or high-end vision systems, and those we’ve coupled right away,” Mehrabian said. “But we’re still working on the rest of the stuff, like our marine businesses.”
The acquisition could help save the company millions, he said, but the key reason for the purchase was creating new products and growing revenue.
“As we move the revenue up and keep our costs down, we think that will help improve our margins,” Mehrabian said.
Flir’s operating margin for the third quarter of 2021 was 21.5%, a figure Mehrabian wants to get higher. It was in the low teens much of last year due to the pandemic.
Asked about future acquisitions, Mehrabian said any big purchase would likely not happen soon because of the money the company spent to acquire Flir Systems. Teledyne paid around $8 billion in cash and stock for Flir.
“We are looking at smaller acquisitions, as we did back in 2017,” Mehrabian said. “In the interim, we also bought about $500 million of smaller assets, so in the shorter term we’ll do small acquisitions and in the longer term, we’ve promised the rating agencies that we won’t do anything very big.”
Teledyne’s other segments also saw organic growth in the third quarter of 2021. The company’s instrumentation segment grew 9% to $287.1 million, its aerospace and defense engineering segment grew 11.7% to $144.8 million, and its engineered systems segment grew 1.4%, to $102.4 million. The company has also increased its earnings guidance for the full year. Teledyne believes earnings per share will be in the range of $9.13 to $9.29 for 2021, while earnings per share excluding costs from the Flir acquisition have been upped to $16.35 to $16.45 for the full year, an increase of nearly $1 for both estimates.