TE Connectivity Earnings: Impressive Margins in Dynamic Market Environment Drive Up Our Fair Value

We increased our fair value estimate for TE Connectivity to $128 per share from $125 after good fiscal third-quarter results led us to raise our short-term profitability assumptions. TE’s quarterly sales met guidance, but margins were above our expectations. The company has done well to improve its pricing to offset inflation; this is a testament to the sticky nature of its products, which also underpins our narrow moat rating. Transportation sales, the firm’s largest driver, showed continued strength and reflected TE’s strong position in electric vehicles. There are pockets of weakness, primarily due to industrial and data center customers digesting built-up inventory, but we think TE is executing nicely against that backdrop. We still see the shares as moderately overvalued, however, and would advise investors to wait for a pullback.