November 3, 2011 / 10:26 AM / 8 years ago

UPDATE 3-TE Connectivity beats, warns on consumer markets

* Q4 adjusted shr $0.89 vs. $0.86 expected

* Q4 rev up 25 pct to $3.91 bln

* Sees FY 2012 adjusted shr $3.10 to $3.40

* Shares down 0.2 percent

Nov 3 (Reuters) - TE Connectivity Ltd reported a 10 percent increase in quarterly earnings on Thursday, helped by demand for electronic connectors used in cars and planes, but the company said demand was soft in some markets and forecast 2012 sales below Wall Street estimates.

Executives said growth in key auto markets like Germany and China was slowing slightly, while Southern Europe, hit by a debt crisis, was clearly weaker.

“About the only piece of our business that is really weaker fundamentally than a year ago is consumer,” Chief Executive Officer Tom Lynch said on a conference call. “We have been adjusting our costs down.”

TE Connectivity said it had cut about 3,000 jobs over the past 100 days, in a mix of temporary and permanent reductions. It added that it had a relatively weak position in the smart-phone market.

The company, which also raised its dividend, reported net income of $326 million, or 75 cents per share, for the fourth quarter ended on Sept. 30, up from $297 million, or 66 cents per share, a year earlier.

Excluding special items, earnings from continuing operations were 89 cents a share, 3 cents ahead of the analysts’ average estimate, according to Thomson Reuters I/B/E/S.

Revenue rose 25 percent to $3.91 billion, slightly below Wall Street forecasts of $3.93 billion.

Sales jumped 27 percent in the company’s transportation segment, its biggest, and the business had much higher profit margins. But sales fell in the data communications and consumer devices markets, and TE Connectivity said weak housing and reduced government incentives in China were pressuring demand among appliance makers.

Shares of TE Connectivity, formerly known as Tyco Electronics, were down 0.2 percent at $34.87 in early trading.

GROWING AUTO MARKETS

TE Connectivity, whose peers include Molex Inc and Amphenol Corp , said it expected continued growth in auto markets and investment in broadband networks as well as an improving ommercial aerospace market.

Autos account for about a third of total company sales, and TE Connectivity has said it expects to benefit long-term from growing electronics content in cars.

It forecast fiscal 2012 earnings of $3.10 to $3.40 a share, excluding items, on sales of $14.3 billion to $14.9 billion. That compares with the analysts’ average estimate of $3.30 a share on sales of $15.1 billion.

Connector industry bookings have shown a marked slowdown in telecom, industrial and technology markets, analysts say, but pricing has so far held up. TE Connectivity said it expected raw materials inflation to have a modest impact next year; pricing is keeping up with higher copper and gold costs.

The company warned that demand is soft in the markets served by its communications and industrial solutions unit, which will push first-quarter earnings below those of the just-reported fourth quarter. That segment will recover in the back half of the fiscal year, it said.

TE Connectivity’s board recommended increasing the quarterly dividend by 17 percent to 21 cents a share, starting in the third quarter of 2012. It also authorized raising its stock buyback by $1.5 billion, after repurchasing around 10 million shares in the most recent quarter.

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