TE Connectivity Is a New Addition to AQR Capital’s Portfolio


Apr. 16 2015, Updated 9:10 a.m. ET

AQR Capital’s holdings in TE Connectivity

According to its 13F filing, AQR Capital initiated a position in TE Connectivity (TEL) by purchasing 2,972,643 shares of the company during the fourth quarter of 2014. TEL stock represented 0.39% of the fund’s 4Q14 portfolio.

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About TE Connectivity

TE Connectivity designs and manufactures sensors and connectivity solutions. The company operates via four segments:

  • Transportation Solutions
  • Industrial Solutions
  • Network Solutions
  • Consumer Solutions

The Transportation Solutions segment is a major player in electronic components such as connectors, terminals, circuit protection devices, application tooling, and other customized solutions that cater to the automotive market.

The Industrial Solutions segment supplies products that distribute and connect data and power, including cables, wires, relays, connectors, and heat-shrinking tubing.

The Network Solutions segment is a major supplier of infrastructure systems and components to the telecom market. This segment also provides electronic components for the data communications market. Offerings include wireless products, fiber optics, and connectors.

The Consumer Solutions segment supplies electronic components to the appliance and personal mobile device markets.

TEL is part of the iShares S&P 500 Value ETF (IVE). The company has a weightage of 0.16% in the fund.

Acquisition of AdvancedCath

TE Connectivity recently announced its agreement to purchase AdvancedCath for a sum of $190 million. AdvancedCath is a provider of cutting-edge catheter systems. TEL expects the acquisition to expand its sensor and connectivity position in the high-growth and attractive interventional segment within the medical market.

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Fiscal 1Q15 segment results

TEL’s Transportation Solutions segment posted revenues of $1.61 billion in fiscal 1Q15, showing an increase of 12% from the prior-year period’s revenues of $1.44 billion. Adjusted operating margin was 21.4%, up from 20.6% in the prior-year period. Production growth drove this revenue increase. Strength in China and the US drove growth in the segment’s Commercial Transportation and Automotive businesses.

Revenues of the Industrial Solutions segment were $784 million, representing growth of 3% over the prior-year period. This segment has posted six consecutive quarters of growth on a year-over-year basis. The company expects its investments in “go-to-market resources” and “footprint optimization” to accelerate profit growth.

The Network Solutions segment posted revenues of $704 million, which was a 1% drop compared to the prior-year period. Adjusted operating margin grew from 7.2% to 8.8%. The Subsea Communications business within this segment is building momentum. However, project delays in South America and Europe offset the strength of the Broadband Networks business in North America.

The Consumer Solutions segment’s revenues decreased by 11% to $366 million in fiscal 1Q15.

TE Connectivity offers a dividend yield of 1.6%, which is slightly lower than the 1.9% given by Corning (GLW) and higher than the 0.8% provided by Amphenol Corporation (APH).

In the next part of this series, we will analyze AQR Capital’s new position in Delphi Automotive (DLPH).


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