TE Connectivity's Q1 Beats Our Expectations Despite Continued Supply Chain Constraints; FVE to $125

Narrow-moat TE Connectivity opened fiscal year 2022 with first-quarter results outpacing guidance and our expectations on both the top and bottom line, and we’re raising our fair value estimate to $125 per share, from $120 previously. TE continues to face headwinds with supply chain constraints worse than 90 days ago. TE’s largest end market, automotive, was down 7% year over year with management noting $100 million in pushed out sales due to supply constraints. Strong momentum in both the Industrial Solutions (IS) and Communications Solutions (CS) segments propelled the top line, with 20% and 40% revenue growth year over year, respectively. Within CS, first quarter order growth was helped by a pulling-in of demand from cloud and data center customers that are placing orders beyond the first quarter due to supply chain uncertainty. We believe market uncertainty regarding global automotive production sent shares down 3% following the release, but our long-term view of content growth due to increased electrification and connectivity for TE remains unchanged. We continue to view shares as moderately overvalued.