TE Connectivity Earnings: Strong Results Don't Alter Long-Term Fundamentals; Cloud Weakness Lingers

We maintain our $125 per share fair value estimate for narrow-moat TE Connectivity after it reported strong fiscal second-quarter results. Sales and earnings came in above our expectations, but our long-term forecasts are unchanged. TE benefited from lower-than-expected foreign-currency headwinds and some pockets of demand strength in the quarter that we don’t see as durable fundamental catalysts. Pricing was also a benefit, and we see this as a bright spot going forward. Demand continues to look healthy in the automotive and industrial markets, while the communications market remains challenging. We see shares as fairly valued, and would point investors to the more-discounted, moaty components names.