TE Connectivity orders hit record high, with data center growth and automotive content per vehicle in focus
TE Connectivity’s fiscal-quarter results and guidance for the next quarter both exceeded market expectations, but the data center business’s beat was limited. Management expects the business to add at least 1 billion dollars in revenue annually over the next several years, with growth in fiscal 2027 weighted toward the second half.
Original source：Goldman Sachs & Co. LLCFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs is optimistic about TE Connectivity’s order and data center growth outlook, but the recent data center revenue beat was limited, and growth in automotive content per vehicle varies by region.
Where did results and orders outperform expectations?
In the fourth quarter of fiscal 2026, TE reported revenue of 5.312 billion dollars, up 13% organically year over year and above the FactSet consensus of 5.286 billion dollars. Adjusted earnings per share were 3.14 dollars, above the consensus of 3.07 dollars. The adjusted operating margin was 22.1%, in line with market expectations.
Quarterly orders were 6.1 billion dollars, up 29% year over year and 6% sequentially. The book-to-bill ratio rose to 1.14, from 1.10 in the prior quarter and 0.99 a year earlier. The company entered fiscal 2027 with a record backlog.
The stock fell approximately 2% after the results were released, while the S&P 500 index was roughly flat over the same period. Goldman Sachs attributed the decline to the limited extent to which revenue from data center-related businesses exceeded investor expectations.
Why does data center growth remain key?
Digital Data Networks (DDN), which includes AI and cloud businesses, reported fourth-quarter revenue of 949 million dollars, up 34% organically year over year, but only slightly above the Visible Alpha consensus of 944 million dollars.
Management expects DDN revenue to increase by at least 1 billion dollars year over year in fiscal 2027 and annually over the medium term. Based on the existing backlog, the increase in fiscal 2027 is weighted toward the second half. Goldman Sachs sees demand for data center computing and energy infrastructure as a long-term growth driver.
Growth is not limited to data centers: Industrial Solutions revenue grew 20% organically year over year in the fourth fiscal quarter, with Automation & Connected Living and Energy up 18% and 12%, respectively.
How is the automotive business growing as production falls?
Automotive revenue grew 6% organically year over year in the fourth fiscal quarter, while underlying automotive production declined over the same period. Management attributed the growth to increased product content per vehicle in Asia and Europe; North America was weaker because of a lower share of electric vehicle models.
The company expects automotive production to decline slightly in fiscal 2027, but its own growth rate to exceed the market’s by 4 to 6 percentage points. Goldman Sachs sees rising content per vehicle as a long-term tailwind, while noting that growth varies across regions.
How does guidance for the new fiscal year change Goldman Sachs’s valuation?
The company guided for fiscal first-quarter 2027 revenue of approximately 5.35 billion dollars and operating earnings per share of approximately 3.30 dollars, above the market consensus of 5.138 billion dollars and 3.01 dollars, respectively. Revenue guidance includes a reduction of approximately 50 million dollars from refunds of IEEPA tariffs to customers; the company expects a neutral impact on earnings per share.
The company expects full-year organic revenue growth in fiscal 2027 to be close to the approximately 12% recorded in fiscal 2026. Based on higher revenue and margin expectations, Goldman Sachs raised its earnings-per-share forecasts for fiscal 2027 and 2028 from 13.10 dollars and 14.70 dollars to 13.95 dollars and 15.40 dollars, respectively.
Goldman Sachs maintained its Buy rating and raised its 12-month price target from 288 dollars to 293 dollars: higher earnings forecasts offset the effect of a reduction in the valuation multiple from 20 times to 19 times, with the lower multiple reflecting declining peer valuations.
