Amphenol Quarter In-Line

Amphenol Corporation (APH - Analyst Report), which manufactures connectors that are primarily used for a wide range of sophisticated electronic applications, yesterday reported sales of $685.2 million in the second quarter of 2009. Sales were down 19% from a year ago but up 3.8% sequentially and surpassed management’s guidance of revenues between $660 million and $675 million and consensus estimate of $673 million.

Currency translation effect decreased sales by approximately 3% or by $23.0 million in the second quarter of 2009. From an organic standpoint (excluding acquisitions and foreign exchange impact), sales were down 21% year over year and down 1% sequentially.

Gross margin dipped to 31.2% from 32.7% reported in the year ago quarter but flat sequentially. Operating margin declined to 16.9% from 19.8% in the comparable quarter of last year but was essentially flat on a sequential basis. GAAP EPS of $0.43 beat the consensus estimate by a penny.

Margins benefited from lower material costs and other cost-cutting measures, which was offset by the impact of significantly lower sales volumes. During the second quarter, the company reduced its headcount by 1500 people, or 6% of its workforce.

Going forward, APH stated that though the economic environment remains uncertain, the company saw a stabilization of demand in most markets. Based on constant currency exchange rates and some seasonal moderation, APH expects revenues between $670 million and $685 million in the third quarter of 2009, against consensus estimate of $684 million. Q3:09. EPS is projected within $0.41 – $0.43 against consensus estimate of $0.44.

The downturn in the economy has impacted the company’s business along with pricing pressure. However, we remain optimistic about Amphenol’s long-term growth prospects in the mobile devices business. Demand for mobile phones remains strong.

Beyond mobile phones, the company continues to expand the use of its products into fast growing sub-markets such as PDAs and laptops. We maintain our Buy on the stock.

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