Electronic component manufacturer Belden (NYSE:BDC) reported Q4 CY2024 results topping the market’s revenue expectations , with sales up 20.8% year on year to $666 million. On the other hand, next quarter’s revenue guidance of $612.5 million was less impressive, coming in 3.3% below analysts’ estimates. Its non-GAAP profit of $1.92 per share was 13.6% above analysts’ consensus estimates.

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“I am proud of our team for delivering an excellent quarter and ending the year on a high note,” said Ashish Chand, President and CEO of Belden.

Company Overview

With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE:BDC) designs, manufactures, and sells electronic components to various industries.

Electronic Components

Like many equipment and component manufacturers, electronic components companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include data centers and telecommunications, which can benefit companies whose optical and transceiver offerings fit those markets. But like the broader industrials sector, these companies are also at the whim of economic cycles. Consumer spending, for example, can greatly impact these companies’ volumes.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Belden’s 2.9% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Belden’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.8% annually.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Enterprise and Industrial, which are 48% and 52% of revenue. Over the last two years, Belden’s Enterprise revenue (network infrastructure and broadband solutions) averaged 3.8% year-on-year declines while its Industrial revenue (infrastructure digitization and automation) was flat.

This quarter, Belden reported robust year-on-year revenue growth of 20.8%, and its $666 million of revenue topped Wall Street estimates by 1.7%. Company management is currently guiding for a 14.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.3% over the next 12 months, an improvement versus the last two years. This projection is commendable and implies its newer products and services will catalyze better top-line performance.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Belden has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.4%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Belden’s operating margin rose by 4.1 percentage points over the last five years, showing its efficiency has improved.

This quarter, Belden generated an operating profit margin of 10.4%, up 2.4 percentage points year on year. The increase was encouraging, and since its operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Belden’s EPS grew at an unimpressive 7.2% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2.9% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Belden’s earnings to better understand the drivers of its performance. As we mentioned earlier, Belden’s operating margin expanded by 4.1 percentage points over the last five years. On top of that, its share count shrank by 10.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Belden, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q4, Belden reported EPS at $1.92, up from $1.46 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Belden’s full-year EPS of $6.37 to grow 20%.

Key Takeaways from Belden’s Q4 Results

We enjoyed seeing Belden exceed analysts’ revenue and EPS expectations this quarter. On the other hand, its quarterly guidance for both metrics fell short. Overall, this quarter was mixed. The softer-than-anticipated outlook seems to be driving the move, and the stock traded down 5% to $110.29 immediately after reporting.

So should you invest in Belden right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.