Digital imaging and instrumentation provider Teledyne (NYSE:TDY) reported Q4 CY2024 results exceeding the market’s revenue expectations, with sales up 5.4% year on year to $1.50 billion. Its non-GAAP profit of $5.52 per share was 5.6% above analysts’ consensus estimates.

Is now the time to buy Teledyne? Find out by accessing our full research report, it’s free.

“In the fourth quarter, we achieved all-time record sales and non-GAAP earnings per share,” said Robert Mehrabian, Executive Chairman.

Company Overview

Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE:TDY) offers digital imaging and instrumentation products for various industries.

Inspection Instruments

Measurement and inspection instrument companies may enjoy more steady demand because products such as water meters are non-discretionary and mandated for replacement at predictable intervals. In the last decade, digitization and data collection have driven innovation in the space, leading to incremental sales. But like the broader industrials sector, measurement and inspection instrument companies are at the whim of economic cycles. Interest rates, for example, can greatly impact civil, commercial, and residential construction projects that drive demand.

Sales Growth

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Teledyne grew its sales at an excellent 12.4% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Teledyne’s recent history shows its demand slowed significantly as its annualized revenue growth of 1.9% over the last two years is well below its five-year trend. We also note many other Inspection Instruments businesses have faced declining sales because of cyclical headwinds. While Teledyne grew slower than we’d like, it did perform better than its peers.

This quarter, Teledyne reported year-on-year revenue growth of 5.4%, and its $1.50 billion of revenue exceeded Wall Street’s estimates by 3.4%.

Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. Although this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI. Click here to access our free report one of our favorites growth stories.

Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Teledyne has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Teledyne’s operating margin rose by 1.9 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Teledyne generated an operating profit margin of 15.8%, down 3.3 percentage points year on year. Since Teledyne’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Teledyne’s remarkable 13% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Although it wasn’t great, Teledyne’s two-year annual EPS growth of 4.2% topped its 1.9% two-year revenue growth.

In Q4, Teledyne reported EPS at $5.52, up from $5.44 in the same quarter last year. This print beat analysts’ estimates by 5.6%. Over the next 12 months, Wall Street expects Teledyne’s full-year EPS of $19.74 to grow 8.6%.

Key Takeaways from Teledyne’s Q4 Results

We enjoyed seeing Teledyne exceed analysts’ revenue expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed and its full-year EPS guidance fell slightly short of Wall Street’s estimates. Overall, this quarter was fine, but the outlook could weigh on shares. The stock remained flat at $482.45 immediately after reporting.

Is Teledyne an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.