Earnings Results: • Record Q1 non-GAAP operating margin, adjusted EPS, and free cash flow • Sales impacted by deterioration in some short-cycle instrumentation markets • Digital Imaging sales declined 4.1% due to lower machine vision sales, partially offset by growth in defense • Instrumentation sales decreased 0.9%; marine sales up, environmental and test & measurement down • Aerospace and Defense Electronics sales increased 7.2% driven by commercial aerospace and defense • Engineered Systems revenue decreased 10.5% impacted by lost to complete estimate revisions
Future Guidance: • Flat full year 2024 sales compared to 2023 expected • Q2 sales expected to be sequentially flat with Q1, increasing in second half of the year • Overall operating margin expected to remain flat in 2024 vs 2023 • Plans to renew stock repurchase authorization and begin repurchasing shares in Q2 • Continuing to evaluate acquisition opportunities • Q2 2024 GAAP EPS guidance of $3.57 to $3.70; non-GAAP EPS of $4.40 to $4.50 • Full year 2024 GAAP EPS guidance of $16.02 to $16.27; non-GAAP EPS of $19.25 to $19.45
Teledyne is facing a bifurcated market environment, with strength in longer-cycle businesses like defense and energy being offset by weakness in some short-cycle instrumentation and industrial automation markets. Digital Imaging in particular saw sales declines driven by an approximately 30% decrease in sales to industrial machine vision markets. However, this was partially balanced by nearly 30% growth in defense-related imaging businesses.
The company expects flat year-over-year sales in 2024, with sequential improvements in the second half driven by strong order activity in longer-cycle businesses. Despite sales pressures, Teledyne expects to maintain overall operating margins through cost control measures.
Notably, with a strong balance sheet and record free cash flow, Teledyne plans to renew its share repurchase authorization and is evaluating acquisition opportunities. Management likened the current environment to the 2014-2016 period, where the company made strategic acquisitions and repurchases during a downturn that positioned it for significant growth in the subsequent recovery.
Quotes: “Orders have been strong for two consecutive quarters with the increase almost entirely due to our longer cycle businesses such as defense and energy.” - Robert Mehrabian, Executive Chairman
”In conclusion, orders have been strong for two consecutive quarters with the increase almost entirely due to our longer cycle businesses such as defense and energy. However, given the nature of these businesses, converting much of the greater backlog to sales will not begin until the second half of 2024.” - Robert Mehrabian