Bull of the Day: Teledyne Technologies (TDY)
During the recent market turmoil and amid fears of a looming recession as signaled by the inversion of yields on short and long term Treasury securities, there’s been renewed interest in defensive stocks that are naturally resistant to changes in the economic cycle.
The reasoning is that companies that provide the goods and services that people, companies and even governments buy in all economic situations will maintain share value even as tech companies who are much more dependent on the business cycle suffer.
Health Care and Pharmaceutical stocks are an obvious choice, as are Consumer Staples and Utilities. Sometimes overlooked, the Defense Industry also generally holds up well during tougher economic conditions.
Teledyne Technologies (TDY) offers the predictability of the Defense stocks, but also offers diversification into adjacent businesses that are minimally economically sensitive. Though it was initially focused on the defense industry – especially aerospace – Teledyne now provides cutting edge technology for medical imaging, deepwater oceanographic exploration and research, manufacturing automation and air and water testing.
With annual sales north of $3B, Teledyne receives about a quarter of revenues from the US Government, with the remaining 75% spread fairly evenly among Offshore Energy and Marine Instrumentation, Electronic Testing and Measurement, Commercial Imaging and Aerospace/Industrial.
Since 2000, the company has increasingly diversified its lines of business, even as it divested operations in less profitable businesses like Aerospace Engines and Printed Circuits. The result has been a steady increase in gross margins.
Teledyne constantly seeks to reduce complexity and overhead, emphasize key customers and products and improve pricing on niche products.
For the past two decades, Teledyne has delivered consistently rising revenues, net earnings and cash flow. Over that period, the shares have risen more than 3200% – easily outpacing the S&P 500 and the Aerospace industry average.
Thanks in part to a stellar earnings history – including 20 consecutive beats of the Zacks Consensus Earnings Estimate, Teledyne shares have marched steadily higher, even shrugging off much of the recent trade and interest rate-related volatility.
While sales growing in high single-digits and earnings in the mid-teens might not sound spectacular, it’s a very comforting pattern in uncertain times. Last quarter’s 17% beat of the Zacks Consensus Earnings Estimate was a standout in an earnings season that mostly saw more modest increases.
Estimates for full-year 2019 earnings have risen from $9.35/share to $9.95/share in the past 30 days – a 12% increase over 2018. Those recent revisions earn Teledyne a Zacks Rank #1 (Strong Buy).
Teledyne’s corporate slogan “Everywhereyoulook” is a nod to the company’s industry-leading imaging equipment as well as the ubiquity of its instruments and equipment in a wide-range of modern equipment.
The company’s proven track record, consistent performance and continued opportunities for growth and margin improvement make it a sound choice to anchor a portfolio during uncertain times.
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Teledyne Technologies Incorporated (TDY): Free Stock Analysis Report
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