TE Connectivity(US:TEL)2022-11-02 18:32Financial Data and Key Metrics Changes - TE Connectivity reported Q4 sales of $4.4 billion, up 14% year-over-year, with adjusted earnings per share (EPS) of $1.88, an 11% increase year-over-year [19][20][23] - For the full year 2022, sales reached a record $16.3 billion, up 9% year-over-year, with adjusted EPS at $7.33, a 13% increase [22][51] - The company experienced a significant foreign exchange headwind of approximately $760 million for the full year and expects about $1 billion in 2023 [52] Business Line Data and Key Metrics Changes - Transportation segment sales increased 13% organically year-over-year, with the auto business growing 16% [39] - Industrial segment sales rose 16% organically, driven by strong performance in industrial equipment and aerospace [42] - Communication segment saw a 3% organic growth, but the appliance business declined 46% due to market moderation [44] Market Data and Key Metrics Changes - Orders for Q4 were $4.3 billion, reflecting resilience in transportation and industrial markets, while communication segment orders showed moderation [33] - Backlog increased to $6 billion, up 11% year-over-year, with a book-to-bill ratio of 1.03 in transportation [34] - Year-over-year growth in orders was 6% in China and Europe, while North America remained flat [38] Company Strategy and Development Direction - The company is focused on long-term growth opportunities in electric vehicles, smart factory applications, and renewable energy [32] - TE Connectivity is implementing price increases to offset inflationary pressures and expects margin recovery in the second half of 2023 [30][46] - The company aims to maintain a strong cash generation model while returning capital to shareholders [54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from global economic uncertainty but emphasized strong operational performance and solid demand across most markets [9][10] - The company expects continued growth in transportation and industrial segments, while communication markets may face headwinds [86][90] - Management remains optimistic about long-term content growth driven by electric vehicle adoption and market positioning [125] Other Important Information - TE Connectivity returned over $2 billion to shareholders through share buybacks and dividends in fiscal 2022 [54] - The company reduced inventory by approximately $350 million in Q4 to align with improving supply chain conditions [21] Q&A Session Summary Question: Earnings trajectory into 2023 - Management discussed the impact of inventory reduction on margins and highlighted a record free cash flow of nearly $750 million in Q4 [62] Question: Order and backlog trends - Management clarified that a book-to-bill below one is expected as supply chains improve, with no significant cancellations or push-outs [73] Question: End markets outlook - Management provided insights on transportation, industrial, and communication segments, noting challenges and growth opportunities [82][90] Question: Gross margin impact from inventory reduction - Management confirmed that the inventory reduction would have a temporary impact on margins, with expectations for recovery in subsequent quarters [93] Question: Operating margin trajectory - Management indicated that transportation margins are expected to improve in the second half of the fiscal year due to planned price increases [100] Question: Content growth expectations - Management expressed confidence in exceeding the 4% to 6% content growth target due to electric vehicle penetration and stable production [125]