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Amphenol Corporation (APH - Analyst Report) reported stellar third quarter 2013 results with record revenues and recurring earnings per share. Net income for the reported quarter came in at $160.8 million or 99 cents per share compared with $147.4 million or 90 cents in the year-ago quarter. Excluding a one penny charge for acquisition-related transaction costs and a benefit of 2 cents related to a reduction in tax expense, recurring earnings for the reported quarter were 98 cents per share. The recurring earnings beat the Zacks Consensus Estimate by a couple of cents.
Quarterly sales were at a record high of $1,153.1 million in third quarter 2013 versus $1,103.4 million in the year-earlier quarter and exceeded the Zacks Consensus Estimate of $1,141 million. The year-over-year growth was attributable to solid organic and inorganic growth across diversified markets served by the company, which include commercial aerospace, automotive, broadband, industrial and information technology and data communications markets.
Amphenol received strong orders worth $1.145 billion in the reported quarter, representing a book-to-bill ratio of 0.99 to 1. Operating margin for the company improved 20 basis points year over year to 19.7%.
Segment wise, Cable business represented 8% of total sales in third quarter 2013 and was up 28% year over year, primarily driven by an accretive acquisition in 2012. The Interconnect business, which accounted for 92% of sales, was up 3% 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 7% year over year primarily due to robust contributions from servers and storage equipment.
Military: Sales from this end market accounted for 12% of total sales in third quarter 2013, down 3% year over year due to reduced purchasing activity by defense equipment manufacturers.
Commercial Aerospace: Aerospace market comprised 6% of total sales in the reported quarter and increased 27% year over year due to increase in production volumes of existing and next-generation commercial aircraft.
Handset/Mobile Devices: Sales from this segment declined 14% year over year and accounted for 18% of the total sales. The decrease in sales was attributable to three factors – a shift toward lower content white-box tablets, a faster-than-expected shift toward Wi-Fi only devices, and lower unit sales of higher content new programs.
Industrial: Sales accounted for 14% of the total revenue in third quarter 2013, up 9% year over year due to the benefits of the acquisition of DC Electronics.
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 25% year over year primarily driven by an increase in production volumes, coupled with growth related to new electronics applications and acquisitions.
Mobile Networks: Sales from this segment declined marginally year over year in the reported quarter and accounted for 10% of the total revenue. The year-over-year decrease was primarily due to a moderation in sales to equipment manufacturers.
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 Ionix Aerospace Ltd, a U.K.-based firm for high technology cable assembly focused primarily on the commercial aerospace market, in October. The acquisition expanded Amphenol’s presence in the ever-increasing technology-dominant market.
Balance Sheet & Cash Flow
During the quarter, Amphenol purchased 1.5 million shares for $116 million and currently has 6 million shares remaining under its stock repurchase program. Cash and cash equivalents stood at $889.4 million with long-term debt of $1.78 billion.
At quarter-end, Amphenol had $187 million available under its $1.5 billion revolving credit facility with $683 million in borrowings. Leverage and interest coverage ratios remained very strong at 1.8x and 17x.
Cash flow from operations in the reported quarter aggregated $197 million, which equated to 122% of net income. Amphenol paid quarterly dividend of 20 cents per share.
Despite the uncertainties prevailing in the global economy, Amphenol remains bullish about 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 $1.146 billion and $1.171 billion in fourth quarter 2013 and earnings per share between 96 cents and 99 cents. For 2013, management projects revenues between $4.515 billion to $4.540 billion, up from earlier expectations of $4.490 billion and $4.540 billion. Earnings per share guidance range for 2013 was narrowed to $3.76 to $3.79, from earlier projections of $3.76 to $3.85.
Amphenol currently has a Zacks Rank #2 (Buy). Some other players in the industry worth reckoning include TE Connectivity Ltd. (TEL - Snapshot Report), CalAmp Corp. (CAMP - Snapshot Report) and Littelfuse Inc. (LFUS - Snapshot Report), each of which carry a Zacks Rank #2 (Buy).