TE Connectivity delivered a solid QQ2 2024 performance in a dynamic macro environment. Revenue came in at $3.97 billion (GAAP) with organic growth of 3% quarter-over-quarter and 0% to negative year-over-year on reported metrics, while adjusted EPS rose 13% year-over-year to $1.86. The company achieved an adjusted operating margin of 18.5%, a 250 basis-point expansion versus the prior year, led by margin leverage across all three segments (Transportation, Industrial Solutions, and Communications). Management highlighted that margin expansion was driven by non-volume levers and price actions that effectively recovered inflationary costs, supporting a resilient earnings trajectory even amid modest demand growth.
Management also underscored an improving order environment, with orders up 6% sequentially to $4.0 billion and a book-to-bill above 1, signaling macro stability in most served markets. The quarter featured strong cash generation: operating cash flow of $710 million and free cash flow of $543 million, with first-half free cash flow totaling about $1.1 billion and management reiterating an objective to maintain free cash flow conversion above 100% for the year. The company deployed capital toward a Schaffner acquisition (Industrial segment) and returned roughly $1.2 billion to shareholders, indicating a disciplined capital allocation framework.
A focal theme is TE’s AI initiative, which management described as broad-based across hyperscale and cloud ecosystems, with a revenue ramp from approximately $200 million in 2024 to potentially $400 million in 2025 and a path toward $1 billion in a few years. This complements ongoing growth in EV/e-mobility content (4–6 percentage point outperformance relative to production) and ongoing investments in high-growth data center and AI applications within the Communications segment. The destocking tailwinds seen in Communications are expected to fade into growth in Q3, while Industrial Equipment destocking may persist into late 2024, potentially moderating near-term top-line momentum in that segment. These dynamics, coupled with a USD headwind, frame a constructive but carefully calibrated outlook for the balance of 2024 and into 2025.