Teledyne's (NYSE:TDY) Q1: Beats On Revenue

Digital imaging and instrumentation provider Teledyne (NYSE:TDY) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 7.4% year on year to $1.45 billion. Its non-GAAP profit of $4.95 per share was 0.6% above analysts’ consensus estimates.

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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

Reviewing a company’s long-term sales performance reveals insights into its 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 12.5% 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 performance shows its demand has slowed significantly as its annualized revenue growth of 2.2% over the last two years was well below its five-year trend.

This quarter, Teledyne reported year-on-year revenue growth of 7.4%, and its $1.45 billion of revenue exceeded Wall Street’s estimates by 1.5%.

Looking ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months. While this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

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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 16.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Teledyne’s operating margin rose by 1.1 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Teledyne generated an operating profit margin of 17.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

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 12.7% 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 more recent period because it can provide insight into an emerging theme or development for the business.

Although it wasn’t great, Teledyne’s two-year annual EPS growth of 4.5% topped its 2.2% two-year revenue growth.

In Q1, Teledyne reported EPS at $4.95, up from $4.55 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Teledyne’s full-year EPS of $20.14 to grow 10.1%.

Key Takeaways from Teledyne’s Q1 Results

It was good to see Teledyne narrowly top analysts’ revenue expectations this quarter. We were also happy its EBITDA 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. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The areas below expectations seem to be driving the move, and the stock traded down 1.3% to $455 immediately following the results.

Should you buy the stock or not? 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.