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Amphenol (APH) Up 1.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Amphenol (APH). Shares have added about 1.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Amphenol due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Amphenol Q2 Earnings Top Estimates, Revenues Fall Y/Y

Amphenol’s second-quarter 2020 adjusted earnings of 81 cents per share beat the Zacks Consensus Estimate by 26.6%. However, the figure declined 12% year over year.

Although net sales decreased 1.4% year over year to $1.987 billion, the same was much better than the consensus mark of $1.751 billion. Unfavorable foreign exchange hurt sales by $22 million.

The top line was negatively impacted by the coronavirus pandemic as certain customers of Amphenol experienced lower demand. Production also suffered from government-mandated shelter-in-home guidelines.

Markedly, sluggish automotive and commercial air markets were negated by strong growth in the information technology and data communications, mobile devices, and industrial markets in the quarter under review.

Quarterly Details

Interconnect Products and Assemblies’ (95.5% of net sales) sales dipped 1.4% from the year-ago quarter to $1.898 billion. Moreover, Cable Products and Solutions sales were $89 million, down 0.8% year over year.

Gross margin on a GAAP basis contracted 170 basis points (bps) on a year-over-year basis to 30.4%.

Selling, general and administrative expenses (SG&A) as a percentage of revenues increased 50 bps on a year-over-year basis to 12.4%.

Adjusted operating margin contracted 180 bps on a year-over-year basis to 18%.

Segment wise, Interconnect Products and Assemblies’ operating margin shrank 220 bps on a year-over-year basis to 20% while Cable Products and Solutions’ operating margin contracted 30 bps to 9.4%.

Balance Sheet and Cash Flow

As of Jun 30, 2020, Amphenol had cash and cash equivalents worth $1.31 billion, lower than $2.38 billion as of Mar 31, 2020. The company also repaid debt worth $1.3 billion.

Cash flow from operations was $368 million compared with $384.3 million in the previous quarter.

During the quarter, the company paid roughly $74 million in dividends.

Guidance

Amphenol expects third-quarter earnings between 84 and 86 cents per share. Revenues are anticipated between $1.960 and $2 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 13.35% due to these changes.

VGM Scores

At this time, Amphenol has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Amphenol has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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