Amphenol's 1Q Earnings Beat, Up Y/Y

Zacks

Amphenol Corporation (APH), a leading producer of electronic systems, reported strong first quarter 2013 results with earnings per share (excluding one-time items) of 87 cents compared to 77 cents in the year-ago quarter. The first quarter 2013 earnings beat the Zacks Consensus Estimate by a penny. The GAAP EPS for the reported quarter was 94 cents, primarily due to a one-time tax gain of 7 cents per share.

Sales came in at $1,079.8 million in first quarter 2013 versus $981.6 million in the year-earlier quarter and missed the Zacks Consensus Estimate of $1,081 million. The sales growth was driven by healthy inorganic and organic growth and robust performances across diversified markets led by mobile devices, commercial aerospace, broadband communications and industrial.

Amphenol received strong orders worth $1.120 billion in the first quarter 2013, representing a book-to-bill of 1.04 to 1. Operating margin for the company improved to 19.2%, up 30 basis points year over year.

Segment wise, Cable business represented 8% of total sales in first quarter 2013 and was up 14% year over year, primarily due to accretive acquisitions. The Interconnect business, which accounted for 92% of sales, was up 10% year over year.

In terms of end markets, revenue from Information Technology and Data Communication Equipment accounted for 19% of the total sales in the reported quarter, up 5% year over year primarily due to robust contributions from servers and storage equipment.

Military: Sales from this end market accounted for 13% of total sales in first quarter 2013, flat year over year due to moderate purchasing activity by defense equipment manufacturers.

Commercial Aerospace: Aerospace market accounted for 6% of total sales in the reported quarter, an increase of 15% year over year. The year-over-year increase was driven by higher demand from jetliner production and launch of new airplane platforms.

Handset/Mobile Devices: Sales from this segment increased 21% year over year and accounted for 18% of the total sales. Management expects new technologies of mobile phones to deliver strong performance in the coming quarters.  

Industrial:  Sales accounted for 13% of the total revenue in first quarter 2013, up 8.0% year over year driven by acquisitions.

Broadband Communications: Sales were up 14% on a year-over-year basis, accounting for 8% of the total revenue. The year-over-year increase was driven by benefits of Holland acquisition offset by a moderate demand by the U.S. and international cable operators.

Automotive: Sales from this segment accounted for 12% of total sales in the quarter and jumped 9% year over year primarily driven by an increase in production volumes, coupled with growth related to new electronics applications.

Mobile Networks: Sales from this segment increased 13% year over year in the reported quarter and accounted for 10% of the total. Management is particularly encouraged by the growth in mobile infrastructure market.
 
During the quarter, Amphenol purchased 1.2 million shares for $85 million. As of Mar 31, 2013, cash and cash equivalents stood at $735.0 million, up from $690.8 million in Dec 31, 2012. Long-term debt stood at $1,596.1 million, down from $1,606.2 million in year-end 2012

Outlook

Despite the uncertainties prevailing in the global economy, Amphenol remains bullish regarding its strong revenues and earnings outlook. The ongoing revolution in electronics enables the company to capitalize on these opportunities and strengthen its position in the market. The company remains focused on its strategy of market and geographic diversification to expand its growth opportunities.

Amphenol projects sales between $1.115 billion and $1.140 billion in second quarter 2013 and EPS (excluding one-time items) between 92 cents and 95 cents. For 2013, management projects revenues between $4.580 billion and $4.655 billion, up 7%-8% from 2012. EPS for 2013 is expected between $3.76 and $3.85, up 8%-11% from the previous year.

Amphenol currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now are Anadigicis, Inc (ANAD), Exar Corp (EXAR) and Atmel Corporation (ATML), each carrying a Zacks Rank #2 (Buy).
 

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