Amphenol's 2Q Earnings Beat, Div. Up
Amphenol Corporation (APH) reported strong second quarter 2013 results with record earnings per share and healthy year-over-year growth in revenues. Earnings for the reported quarter came in at 95 cents per share compared with 86 cents in the year-ago quarter. The reported earnings marginally beat the Zacks Consensus Estimate by a penny.
Quarterly sales totaled $1,136.1 million in second quarter 2013 versus $1,061.1 million in the year-earlier quarter and exceeded the Zacks Consensus Estimate of $1,134 million. The year-over-year growth is attributable to solid inorganic and organic growth and robust performances across diversified markets served by the company, including commercial aerospace, automotive, mobile networks and broadband markets.
Amphenol received strong orders worth $1.177 billion in the reported quarter, representing a book-to-bill ratio of 1.04 to 1. Operating margin for the company improved to 19.7%, up 30 basis points year over year.
Segment wise, the Cable business represented 8% of total sales in second quarter 2013 and was up 19% year over year, primarily due to an accretive acquisition in 2012. The Interconnect business, which accounted for 92% of sales, was up 6% year over year.
In terms of end markets, revenues from Information Technology and Data Communication Equipment accounted for 20% of the total sales in the reported quarter, up 6% 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 second quarter 2013, slightly down year over year due to moderate purchasing activity by defense equipment manufacturers.
Commercial Aviation: Aviation market comprised 6% of total sales in the reported quarter, an increase of 23% 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 4% year over year and accounted for 17% of the total sales. Management expects a minimal increase in sales in the coming quarters with lower-than-expected demand levels.
Industrial: Sales accounted for 13% of the total revenue in second quarter 2013, down 6% year over year due to reduced demand in the energy-related segments.
Broadband Communications: Sales were up 24% on a year-over-year basis, accounting for 8% of the quarterly revenues. The year-over-year increase was driven by benefits of Holland acquisition in addition to robust domestic as well as international demands.
Automotive: Sales from this segment accounted for 12% of total sales in the quarter and jumped 20% 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 12% year over year in the reported quarter and accounted for 11% of the total revenue. Management is particularly encouraged by the growth in mobile infrastructure market.
Amphenol aims to diligently focus on its market and geographic diversification strategy along with a strong commitment to develop enabling technologies for its customers in all markets through both organic and inorganic measures. In accordance with this strategy, the company completed the acquisition of DC Electronics, a U.S. manufacturer of value-add interconnect products for a broad range of harsh environment industrial applications, at the end of the second quarter. The acquisition expanded Amphenol’s presence in the ever-increasing technology-dominant market.
During the quarter, Amphenol purchased 1.2 million shares for $96 million and currently has 7.5 million shares remaining under its stock repurchase program. Cash and cash equivalents stood at $723.7 million with long-term debt of $1.78 billion.
At quarter-end, Amphenol had $406 million available under its revolving credit facility. Subsequent to the end of the quarter, the company extended its revolving credit facility to increase the borrowing capacity to $1.5 billion and extend the debt maturity by two years to Jul 2018. At present, the company's availability under the amended facility is approximately $906 million. Leverage and interest coverage ratios remained very strong at 1.7x and 17x.
Cash flow from operations in the reported quarter aggregated $180 million. With stellar quarterly results, Amphenol almost doubled its quarterly dividend payout from 10.5 cents per share to 20 cents. The increased dividend will be payable from Oct 2013.
Outlook
Despite the uncertainties prevailing in the global economy, Amphenol remains optimistic regarding its revenue and earnings expectations. The ongoing revolution in electronics enables the company to capitalize on these opportunities and strengthen its position in the market.
Amphenol projects sales between $1.120 billion and $1.145 billion in third quarter 2013 and EPS between 95 cents and 98 cents. For 2013, management projects revenues between $4.490 billion to $4.540 billion, down from $4.580 billion and $4.655 billion. EPS for 2013 is expected between $3.73 and $3.79, down from $3.76 and $3.85.
Amphenol currently has a Zacks Rank #3 (Hold). Some other players in the industry worth reckoning include TE Connectivity Ltd. (TEL), CalAmp Corp. (CAMP) and Littelfuse Inc. (LFUS), each of which carry a Zacks Rank #2 (Buy).
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