TE Connectivity’s Strong Q3 Outweighs Macro Uncertainty; $125 Fair Value Estimate

We are maintaining our $125 fair value estimate for narrow-moat TE Connectivity after the company reported strong top- and bottom-line results for its fiscal third quarter. While TE continues to face supply chain challenges and foreign exchange headwinds, we think these headwinds are being navigated well, indicated by a strong book-to-bill ratio of 1.02 in the quarter, and continued pricing increases to aid in offsetting inflationary pressures. Our long-term thesis of growth stemming from increased vehicle electrification and content expansion was reaffirmed with management expecting electronic vehicle production to be up more than 30% for the year while the total automotive production environment expected to remain flat. Although we are encouraged by the continued electrification trend, we view shares of the company as fairly valued.