Teledyne Technologies (NYSE: TDY) suffered one of the steepest losses on Wall Street today, falling 12% on a revenue miss to well below the psychologically sensitive $400 per share level. The company, which in addition to digital imaging makes electronic components for the aerospace and defense sectors, saw its shares fall to their 52-week low as investors focused on what went wrong in the first quarter. 

Teledyne, which is in the middle of its second acquisition of the month, spooked investors by lowering its full-year EPS guidance. With a forward P/E ratio of about 17 compared with an average five-year PE ratio of closer to 27x, investors who see a bargain could be back for more before long.  

Glass Half Empty

Teledyne’s Q1 net sales came in at $1.35 billion on estimates for $1.4 billion. Diluted EPS came in at $4.55 vs. Wall Street’s expectations of $4.64. The company revised its full-year GAAP EPS forecast to a range of $16.02-$16.27, down from previous estimates of $17.15-$17.53. Teledyne also announced the pending acquisition of industrial camera maker Adimec Holdings as well as the completion of its Valeport acquisition, an underwater sensor company, in early April.  

Teledyne also slashed its full-year outlook due to plummeting demand in industrial automation as well as the test and measurement segments. As a result, the company warned it expects “full-year sales in those product families to decline meaningfully in 2024.” Those are Teledyne’s highest-margin businesses, and therefore any offset from its marine, aviation or defense businesses is too little too late. In Q1: 

• Digital imaging sales of $740.8 million fell by 4.1% year-over-year. 
• Instrumentation sales of $330.4 million fell by nearly 1%, pressured by the test and measurement instrumentation as well as environmental instrumentation markets. 
• Engineered system net sales of $93.2 million sank 10.5%. 

Teledyne management tried to appease investors by introducing a stock repurchasing program of between $250 million and $300 million amid a strong balance sheet and cash flow. The company’s cash from operating activities hovered at $291 million, a 30% increase compared with year-ago levels. But investors weren’t impressed.

Is Teledyne a Sell in 2024? 

Wall Street seems bullish on Teledyne stock, with six analysts giving TDY a strong buy rating. The average 12-month stock forecast is $500, suggesting that Teledyne has more runway for gains in the near term. But with the downwardly revised forecast, investors might need to be patient before they see that performance materialize. Wall Street’s lowest price target of $475 suggests things could get worse before they get better for Teledyne stock. 

Analysts aren’t too active on TDY stock, but as of early 2024, Needham analysts maintained their “buy” rating. Last year, UBS initiated coverage with a “buy” while Goldman Sachs upgraded the stock to a “buy.”

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