TE Connectivity (TEL) Q1 2026 Earnings Transcript

Core Insights - The company reported first-quarter sales of $4.7 billion, reflecting a 22% increase year-over-year on a reported basis and a 15% increase organically, with both segments contributing to sales exceeding guidance [1][20] - Record orders reached over $5 billion, with a book-to-bill ratio of 1.1, indicating strong momentum [1][6] - The company expects second-quarter sales to be $4.7 billion, representing a 13% year-over-year increase on a reported basis and a 6% increase organically [5][6] Sales and Growth - Sales growth is driven by new program awards from customers, showcasing the company's operational and engineering strengths [2][4] - The company anticipates growth in fiscal 2026 to exceed its long-term target of 6 to 8 points of annual average growth [2][21] - Adjusted earnings per share (EPS) for the first quarter were $2.72, up 33% year-over-year, with adjusted operating margins at 22%, an increase of 180 basis points from the previous year [5][20] Orders and Segments - Orders increased by over $1 billion year-over-year to $5.1 billion, with double-digit organic order growth across all regions [6][30] - The Industrial Solutions segment saw orders grow over 40% year-over-year, with significant contributions from digital data networks and AI revenue exceeding expectations [10][11] - The Transportation segment experienced an 11% increase in orders year-over-year, with growth in all businesses, particularly in commercial transportation [8][13] Financial Performance - The company generated free cash flow of over $600 million, returning 100% of this to shareholders while supporting future growth investments [5][20] - Adjusted operating income for the quarter was over $1 billion, with a GAAP operating income of $963 million [17][20] - The adjusted effective tax rate was approximately 22% for Q1, with expectations to maintain a similar rate in Q2 [18] Future Outlook - The company expects adjusted EPS for Q2 to be around $2.65, reflecting a 20% year-over-year growth [6] - Capital expenditures are projected to be closer to 6% of sales this year to support the growing pipeline of customer awards, particularly in AI programs [21][36] - The company anticipates continued strong performance in both segments, with Q1 results indicating a robust start to fiscal 2026 [21][22]