Teledyne Technologies Incorporated TDY continues to win contracts from the Pentagon and other U.S. allies, courtesy of its cost-effective defense solutions.
Earnings estimates for Teledyne have been revised upward in the past 30 days, reflecting analysts’ optimism on the stock. The Zacks Consensus Estimate for 2019 and 2020 earnings has moved up 3% and 2% during the said period, respectively.
Let’s focus on the factors that make the stock an appropriate pick at the moment.
Earnings Estimate Revision & Surprise History
Teledyne Technologies’ earnings estimates for 2019 and 2020 have moved up 14.98% and 10.24% on a year-over-year basis to $10.21 and $11.25, respectively. The company’s revenue estimates for 2019 and 2020 rose 8.74% and 7.35% on a year-over-year basis to $3.16 billion and $3.39 billion, respectively. The company’s long-term (3 to 5 years) earnings growth is pegged at 7.50%.
The company has an average four-quarter positive earnings surprise of 10.13%.
Zacks Rank & Price Performance
The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 12 months, Teledyne Technologies’ shares have surged 50.6% compared with the industry’s rise of 28.6%.
Debt/Capital & Current Ratio
Teledyne Technologies is consistently striving to preserve balance-sheet strength. Currently, the company has a current ratio of 1.48. Its financial strength will enable the company to meet near-term debt obligation. Its long-term debt-to-capital ratio is 24.67%, lower than the Zacks S&P 500 composite’s level of 43.16% and the industry’s 29.72%.
Favorable Budget & Increasing Contract Wins
The macroeconomic environment has been increasing growth prospects of Teledyne given widespread geo-political uncertainty and the current U.S. administration’s inclination toward higher defense spending. Defense spending for fiscal 2020 is pegged at $750 billion, which suggests 4.4% increase from the nation’s existing defense budget. Increasing spending provisions is expected to drive order growth for defense contractors like Teledyne Technologies.
Higher contract wins bolster the company’s backlog. Keeping up with its usual trend, in the third quarter, the company witnessed consistent backlog growth as orders exceeded sales for the sixth consecutive quarter. Impressively, the company ended the third quarter with the largest backlog in over four years. Such backlog trends indicate impressive revenue growth prospects for the company in the quarters ahead.
Other Key Picks
Some other top-ranked stocks from the same sector are Northrop Grumman Corporation NOC, Curtiss-Wright Corporation CW and HEICO Corporation HEI. All stocks hold a Zacks Rank #2.
Long-term earnings growth of Northrop Grumman, Curtiss-Wright and HEICO is pegged at 13.9%, 8.26% and 13.95%, respectively.
Northrop Grumman, Curtiss-Wright and HEICO delivered an average positive earnings surprise of 11.48%, 8.40% and 10.07% in the last four quarters, respectively.
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