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Teledyne drops on machine vision slowdown

25 Apr 2024

Stock price down as digital imaging division reports 30% decline in industrial machine vision sales.

The stock price of industrial technology company Teledyne Technologies has dropped in value by more than 10 per cent, after the California-headquartered firm said weak demand in machine vision applications would hit overall earnings this year.

For the first quarter of 2024, total sales of $1.35 billion were down only slightly on the same period last year. The firm’s digital imaging business accounted for $741 million of that total, down 4 per cent, with machine vision sales dropping 30 per cent.

Meaningful decline
However, within the digital imaging business - which includes well-known brands like FLIR, DALSA, and e2v - the picture is more complex. Teledyne’s executive chairman Robert Mehrabian told an investor call:

“While overall orders remained strong, sales were impacted by deterioration in some of our shorter-cycle imaging and instrumentation markets. We had previously assumed no full-year sales growth in industrial automation as well as test and measurement markets.

"However, those markets weakened more than planned in the first quarter, and we now forecast full-year sales in those product families to decline meaningfully in 2024.”

More specifically, it is the slowdown in demand for relatively high-margin products used in machine vision that is having an impact.

“What is unusual is that the prediction of the slowdown in industrial automation took us by surprise,” Mehrabian said. “We thought in January that we would be relatively flat for the year in our machine vision businesses. And now we [are] projecting a 20 per cent decline.”

If correct, that outlook would imply a fall in annual machine vision sales from $600 million in 2023, to around $480 million this year.

“Now that seems like a lot, but it's only $120 million,” added Mehrabian. “[But] what is different today from the past is that Teledyne can absorb those kinds of shock much more easily than it could before.”

FLIR sales grow
Meanwhile, other parts of the digital imaging business are helping to offset that decline. Teledyne CEO Edwin Roks reported that although sales to industrial machine vision markets declined approximately 30% year-over-year, applications in drones and integrated counter-drone systems collectively increased by nearly the same degree.

The FLIR division, which is busy producing drones that are being donated to the Ukrainian government, also posted an increase in sales, while demand from the space-based imaging sector remains healthy.

Although the weak machine vision sector has prompted a re-think on his outlook for profits this year, Mehrabian highlighted how the company had already reduced costs across its imaging business.

“Frankly, we expect the overall margins for digital imaging to be flat with last year on much lower revenues,” he told investors. “We have taken [out] costs and if need be, we'll take more. But I think right now, we're doing okay. We're just not very aggressive in our hiring.”

That business is set to expand in the near future, however, thanks to the pending acquisition of Netherlands-based industrial camera firm Adimec.

Commenting on that addition, Mehrabian said: “The only difference between that business and our short-cycle [imaging] business is that they do a lot of custom imaging designs, and they have a significant market in imaging in the defense domain.”

• Immediately following the latest update, Teledyne’s NYSE-listed stock price dropped in value, ending the day at $362.50, down 11 per cent on the prior close. That price equates to a market capitalization of just over $17 billion.

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