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4 Electronics Stocks to Escape Pandemic-Led Disruptions
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Worldwide supply-chain disruptions and end-market dynamics, owing to the pandemic, have affected the Zacks Electronics - Miscellaneous Components industry. Depressed automotive, industrial and linear markets are weighing heavily on the industry’s prospects.
Nevertheless, the underlined industry has been benefiting from the ongoing automation drive and increased spending by manufacturers of semiconductors, automobiles, machinery and mobile phones. Industry participants like TE Connectivity (TEL - Free Report) , Littelfuse (LFUS - Free Report) , BWX Technologies (BWXT - Free Report) and CTS Corporation (CTS - Free Report) remain well-poised to benefit from the solid adoption of AI and the democratization of IoT techniques, which are transforming robotics, industrial automation, transportation systems, retail and healthcare.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies that provide a wide range of accessories and parts used in electronic products. The industry participants’ offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions. They cater to varied end markets such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems, and consumer electronics. Its customers are mainly original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
4 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
Supply-Chain Disruptions Remain Worrisome: The industry players are reeling under the coronavirus-induced macroeconomic woes. Supply chains have been disrupted by the social-distancing and shelter-in-place measures due to the pandemic, which have severely impacted the industry participants. Although economies are gradually reopening in several parts of the world, production delays remain a major concern. The pandemic has aggravated the concerns related to the economic downturn, which continues to affect new bookings of the industry players. The emergence of new variants has made people more apprehensive about further disruptions, hurting their spending patterns.
Labor Shortages Concern: The pandemic-induced labor shortages are continuously impacting the production capacity of electronic companies. The companies are struggling to meet the rising demand due to the reopening of economies, owing to worker absenteeism and short-term shutdowns. Labor shortages are dampening the growth prospects of the industry participants by increasing their lead times.
Automation Boom Act as a Tailwind:The requirement for faster, more powerful and energy-efficient electronics is leading to increased automation. The use of control systems such as computers and robots, as well as information technologies for handling different processes and machinery, is driving the industry. The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will benefit industry participants. IoT-supported factory-automation solutions are other contributing factors. The evolution of smart cars and autonomous vehicles is expected to drive growth of the industry.
Miniaturization Remains a Key Factor: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. The demand for advanced packaging, which enables the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of new device architectures like FinFET transistors and 3D-NAND, and the increasing utilization of new manufacturing materials to increase transistor and bit density are driving the demand for solutions provided by the industry players.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Electronics – Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #209, which places it in the bottom 18% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Lags Sector and S&P 500
The Zacks Electronics - Miscellaneous Components industry has underperformed the broader Zacks Computer and Technology sector and S&P 500 composite over the past year.
The industry has lost 24.3% over this period against the S&P 500’s rally of 6.9%. Notably, the broader sector has declined 9.2%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price to earnings, which is a commonly used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 16.39X versus the S&P 500’s 19.1X and sector’s 22.46X.
Over the past five years, the industry has traded as high as 25.33X, as low as 14.56X and recorded a median of 18.45X, which is depicted in the charts below.
Price/Earnings Ratio (F12M)
4 Electronics - Miscellaneous Components Stocks to Watch
BWX Technologies: The Lynchburg, VA-headquartered company is benefiting from strengthening momentum across its core business on the back of continued progress on Technetium-99m generator commercialization and multiple microreactor design programs. Further, opportunities with small modular reactors in Canada, Poland and the United States remain noteworthy.
The Zacks Rank #2 (Buy) company provides safe and effective nuclear solutions for global security, clean energy, environmental remediation, nuclear medicine and space exploration. It is likely to remain on the growth trajectory, owing to the solid momentum across fuel and fuel handling, medical isotope and field service activity.
BWX Technologies has lost 18.3% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been revised 0.6% upward to $3.15 per share over the past 30 days.
Price and Consensus: BWXT
CTS Corporation: The Lisle, IL-based company is expected to keep benefiting from solid momentum across end-markets and winning businesses. The solid execution of the business diversification strategy and disciplined capital allocation remain major positives.
The Zacks Rank #2 company is a manufacturer of sensors, connectivity components and actuators. It remains well-positioned to sustain the end-market momentum on the back of strategic acquisitions. The TEWA Temperature Sensors buyout has strengthened CTS’ presence in Europe.
CTS has gained 13.3% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been unchanged at $2.13 per share over the past 30 days.
Price and Consensus: CTS
TE Connectivity: The Switzerland-based company is well-poised to gain from strong momentum across data centers. The solid demand for data and devices in cloud applications and data centers, courtesy of the increasing work-from-home trend due to the pandemic, is likely to drive growth. Solid content growth, benefits from the First Sensor buyout, growing automotive and commercial transportation sales, and strength across auto applications remain major positives.
This Zacks Rank #3 (Hold) company manufactures and designs products that connect and protect the flow of power and data inside millions of products used by consumers and industries. It is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.
TE Connectivity has lost 5.2% in the past year. The Zacks Consensus Estimate for its fiscal 2022 earnings has been revised 0.5% downward to $7.18 per share over the past 30 days.
Price and Consensus: TEL
Littelfuse: The Chicago, IL-based company is benefiting from strong product demand, solid execution and disciplined cost-management actions. Solid demand in automotive, and strength in several electronics and industrial markets are also driving its growth. The higher-than-expected demand for electronics from the ongoing work, study and stay-at-home trends is a key catalyst.
The Zacks Rank #3 company is well-positioned to benefit from robust design activity, given several strategic wins in high-growth industrial, electronics and transportation applications.
Littelfuse has lost 14.4% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been revised 0.8% downward to $13.95 per share over the past 30 days.
Price and Consensus: LFUS
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4 Electronics Stocks to Escape Pandemic-Led Disruptions
Worldwide supply-chain disruptions and end-market dynamics, owing to the pandemic, have affected the Zacks Electronics - Miscellaneous Components industry. Depressed automotive, industrial and linear markets are weighing heavily on the industry’s prospects.
Nevertheless, the underlined industry has been benefiting from the ongoing automation drive and increased spending by manufacturers of semiconductors, automobiles, machinery and mobile phones. Industry participants like TE Connectivity (TEL - Free Report) , Littelfuse (LFUS - Free Report) , BWX Technologies (BWXT - Free Report) and CTS Corporation (CTS - Free Report) remain well-poised to benefit from the solid adoption of AI and the democratization of IoT techniques, which are transforming robotics, industrial automation, transportation systems, retail and healthcare.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies that provide a wide range of accessories and parts used in electronic products. The industry participants’ offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions. They cater to varied end markets such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems, and consumer electronics. Its customers are mainly original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
4 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
Supply-Chain Disruptions Remain Worrisome: The industry players are reeling under the coronavirus-induced macroeconomic woes. Supply chains have been disrupted by the social-distancing and shelter-in-place measures due to the pandemic, which have severely impacted the industry participants. Although economies are gradually reopening in several parts of the world, production delays remain a major concern. The pandemic has aggravated the concerns related to the economic downturn, which continues to affect new bookings of the industry players. The emergence of new variants has made people more apprehensive about further disruptions, hurting their spending patterns.
Labor Shortages Concern: The pandemic-induced labor shortages are continuously impacting the production capacity of electronic companies. The companies are struggling to meet the rising demand due to the reopening of economies, owing to worker absenteeism and short-term shutdowns. Labor shortages are dampening the growth prospects of the industry participants by increasing their lead times.
Automation Boom Act as a Tailwind: The requirement for faster, more powerful and energy-efficient electronics is leading to increased automation. The use of control systems such as computers and robots, as well as information technologies for handling different processes and machinery, is driving the industry. The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will benefit industry participants. IoT-supported factory-automation solutions are other contributing factors. The evolution of smart cars and autonomous vehicles is expected to drive growth of the industry.
Miniaturization Remains a Key Factor: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. The demand for advanced packaging, which enables the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of new device architectures like FinFET transistors and 3D-NAND, and the increasing utilization of new manufacturing materials to increase transistor and bit density are driving the demand for solutions provided by the industry players.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Electronics – Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #209, which places it in the bottom 18% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Lags Sector and S&P 500
The Zacks Electronics - Miscellaneous Components industry has underperformed the broader Zacks Computer and Technology sector and S&P 500 composite over the past year.
The industry has lost 24.3% over this period against the S&P 500’s rally of 6.9%. Notably, the broader sector has declined 9.2%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price to earnings, which is a commonly used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 16.39X versus the S&P 500’s 19.1X and sector’s 22.46X.
Over the past five years, the industry has traded as high as 25.33X, as low as 14.56X and recorded a median of 18.45X, which is depicted in the charts below.
Price/Earnings Ratio (F12M)
4 Electronics - Miscellaneous Components Stocks to Watch
BWX Technologies: The Lynchburg, VA-headquartered company is benefiting from strengthening momentum across its core business on the back of continued progress on Technetium-99m generator commercialization and multiple microreactor design programs. Further, opportunities with small modular reactors in Canada, Poland and the United States remain noteworthy.
The Zacks Rank #2 (Buy) company provides safe and effective nuclear solutions for global security, clean energy, environmental remediation, nuclear medicine and space exploration. It is likely to remain on the growth trajectory, owing to the solid momentum across fuel and fuel handling, medical isotope and field service activity.
BWX Technologies has lost 18.3% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been revised 0.6% upward to $3.15 per share over the past 30 days.
Price and Consensus: BWXT
CTS Corporation: The Lisle, IL-based company is expected to keep benefiting from solid momentum across end-markets and winning businesses. The solid execution of the business diversification strategy and disciplined capital allocation remain major positives.
The Zacks Rank #2 company is a manufacturer of sensors, connectivity components and actuators. It remains well-positioned to sustain the end-market momentum on the back of strategic acquisitions. The TEWA Temperature Sensors buyout has strengthened CTS’ presence in Europe.
CTS has gained 13.3% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been unchanged at $2.13 per share over the past 30 days.
Price and Consensus: CTS
TE Connectivity: The Switzerland-based company is well-poised to gain from strong momentum across data centers. The solid demand for data and devices in cloud applications and data centers, courtesy of the increasing work-from-home trend due to the pandemic, is likely to drive growth. Solid content growth, benefits from the First Sensor buyout, growing automotive and commercial transportation sales, and strength across auto applications remain major positives.
This Zacks Rank #3 (Hold) company manufactures and designs products that connect and protect the flow of power and data inside millions of products used by consumers and industries. It is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.
TE Connectivity has lost 5.2% in the past year. The Zacks Consensus Estimate for its fiscal 2022 earnings has been revised 0.5% downward to $7.18 per share over the past 30 days.
Price and Consensus: TEL
Littelfuse: The Chicago, IL-based company is benefiting from strong product demand, solid execution and disciplined cost-management actions. Solid demand in automotive, and strength in several electronics and industrial markets are also driving its growth. The higher-than-expected demand for electronics from the ongoing work, study and stay-at-home trends is a key catalyst.
The Zacks Rank #3 company is well-positioned to benefit from robust design activity, given several strategic wins in high-growth industrial, electronics and transportation applications.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Littelfuse has lost 14.4% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been revised 0.8% downward to $13.95 per share over the past 30 days.
Price and Consensus: LFUS