TE Connectivity plc (TEL) stock intrinsic value fair value estimate & owner earnings analysis

TE Connectivity designs and makes connectors, sensors and related components that carry power and data inside other companies' products. In fiscal 2025 (year ended September 2025) it had $17.3 billion of sales in two segments. Transportation Solutions is 54% of sales and covers cars, trucks and sensors. Industrial Solutions is 46% and covers digital data networks, energy, aerospace and defense, medical, and automation. Its components are designed into customers' products, so customers rarely switch once a design is set. Sales are still cyclical, which is why the cases are far apart. About 38% of sales are in Asia Pacific, and roughly a fifth of sales are invoiced in Chinese renminbi, but the company is an Irish-domiciled, NYSE-listed industrial and is not Chinese-controlled. What we measured. We value the business on owner earnings. That is operating cash flow, less the swing in working capital (receivables, inventory, payables and similar items), less stock-based pay, less the part of capital spending needed just to keep the plants running. Spending to expand capacity is left out, because it is optional. Owner earnings per share were $3.98 in fiscal 2017, $5.11 in 2018, $5.09 in 2019, $4.53 in 2020, $6.68 in 2021, $7.97 in 2022, $7.16 in 2023, $9.10 in 2024 and $10.16 in 2025. The 2016 result was left out of the series because a roughly $1.1 billion tax-sharing payment distorted that year's cash flow. We anchor on the median of fiscal 2019 to 2025, which is $7.16. That window includes the 2019 slowdown, the 2020 pandemic trough, the 2023 destocking, and the recent surge. It is deliberately below the latest two years, and we do not treat the recent surge as permanent. In 2025 owner earnings grew about 11.6%. The base case assumes only 2% in year 1, so no deceleration has to reverse. Base case, $139.4 per share. Owner earnings start at $7.16 and grow 2% a year for ten years. After that they stay flat, with no further growth assumed. We credit 2% because it is below the roughly 4% annual sales growth since fiscal 2019. It also rests on a routine of modest bolt-on acquisitions paid for from its own cash. Growth from AI-related data-center demand, new products and margin gains is left out because none of it is secured. What keeps earnings going after year 10 is the design-in relationship. Earnings held up through the 2020 downturn and every year since. Bear case, $75.5 per share. Owner earnings drop to the fiscal 2020 trough of $4.53 and stay there permanently. Three disclosed risks support this. Transportation Solutions is 54% of sales, and its sales fell 1.0% in fiscal 2025 in sensors and commercial transportation. Tariff and trade policy is an ongoing pressure that management says it only "largely" offsets through pricing and sourcing. And the company paid about $2.3 billion for Richards Manufacturing in April 2025 and issued $2.2 billion of new debt that year. Debt interest is still small, at about $34 million of cash interest in fiscal 2025. Bull case, $231.6 per share. Owner earnings start at the fiscal 2025 actual of $10.16 and grow 4% a year for ten years, then stay flat. Named levers support this. Industrial Solutions sales rose 23.7% in fiscal 2025 (17.6% organically) on digital data networks, energy, and aerospace and defense. Capital spending rose to $936 million from $680 million as capacity was added. Richards Manufacturing was acquired and is now part of the energy business. The 4% rate matches the demonstrated sales growth since fiscal 2019. It does not assume a market recovery. Accounting judgements. Large non-cash items are already inside cash flow. These include amortization of acquired intangibles, and a large deferred-tax swing in 2024 and 2025 that reversed. We did not adjust earnings for them. Because we do not add back the intangibles' wasting value, the flat long-run path stands in for that decay. Working capital swung sharply in fiscal 2022 (about $940 million absorbed). It is stripped out so it does not distort the level. Leverage is reflected only in the bear case, and no net debt is subtracted. What could make this wrong. A prolonged auto downturn or tariff shock could push earnings below the 2020 trough. Alternatively, AI-driven networking demand could prove durable enough to lift earnings above the bull case. Fiscal 2026 to date (nine months) shows sales up about 16% and operating cash flow up about 10%. That is consistent with the base case and does not by itself move our anchor. The margin-of-safety price of $80 is set near the bear value, with a margin of safety for the business's cyclicality.