We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Electronics Stocks to Watch From a Prospering Industry
Read MoreHide Full Article
The Zacks Electronics - Miscellaneous Components industry has been benefiting from the ongoing automation drive and increased spending by manufacturers of semiconductors, automobiles, machinery and mobile phones. Industry players like TE Connectivity (TEL - Free Report) , Littelfuse (LFUS - Free Report) and nVent Electric (NVT - 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. Their offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions. The industry participants 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 mainly consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
3 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
Automation Boom a Tailwind: The requirement of faster, more powerful and energy-efficient electronics has been 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 growth in the industry. The increasing installation of collaborative robots, which add efficiency to production processes by working with production workers, will continue to benefit the 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 have been 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 have been driving the demand for solutions provided by the industry players.
Supply-Chain Disruptions Remain Worrisome: The industry players are reeling under the impacts of the coronavirus-induced macroeconomic woes. Supply chains have been disrupted by the social-distancing and shelter-in-place measures, owing to the pandemic, which, in turn, 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 concerns related to the economic downturn, which continues to wreak havoc on new bookings of the industry players. Increasing health risks and deaths related to the virus outbreak have made people more apprehensive about further disruptions, which, in turn, are hurting their spending patterns.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics – Testing Equipment industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #123, which places it in the top 48% 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 bullish 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Jun 30, 2021, the industry’s earnings estimates for the current year have moved up 3%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
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 6.6% over this period against the S&P 500 and broader sector’s rally of 29% and 30.3%, respectively.
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 18.24X versus the S&P 500’s 21.77X and sector’s 29.66X.
Over the past five years, the industry has traded as high as 25.33X, as low as 14.56X and recorded a median of 18.34X, which is depicted in the chart shown below.
Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Electronics - Miscellaneous Components Stocks to Buy
Littelfuse: The Chicago, IL-based company has been 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 #1 (Strong Buy) company is well-positioned to benefit from a 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 stocks here.
Littelfuse has gained 21.9% in the past year. The Zacks Consensus Estimate for LFUS’s 2021 earnings has been revised 9.2% upward to $12.95 per share over the past 60 days.
Price and Consensus: LFUS
nVent Electric: The London, United Kingdom-based company has been gaining from portfolio strength, and modular and digital platforms. Further, the company’s growth, profits and cash strategies remain noteworthy. Moreover, strengthening relationships with strategic channel partners are expected to continue benefiting the company.
The Zacks Rank #2 (Buy) company, which is a provider of electrical connection and protection solutions, remains optimistic about the strong demand for its products and solutions. Further, solid execution of its strategy across high-growth verticals, product introductions, global expansion and strategic acquisitions remain tailwinds.
nVent Electric has gained 57.8% in the past year. The Zacks Consensus Estimate for NVT’s 2021 earnings has been revised 2.6% upward to $1.95 per share over the past 60 days.
Price and Consensus: NVT
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. TEL is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.
TE Connectivity has gained 33.1% in the past year. The Zacks Consensus Estimate for TEL’s fiscal 2022 earnings has been unchanged at $6.99 per share over the past 60 days.
Price and Consensus: TEL
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
3 Electronics Stocks to Watch From a Prospering Industry
The Zacks Electronics - Miscellaneous Components industry has been benefiting from the ongoing automation drive and increased spending by manufacturers of semiconductors, automobiles, machinery and mobile phones. Industry players like TE Connectivity (TEL - Free Report) , Littelfuse (LFUS - Free Report) and nVent Electric (NVT - 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. Their offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions. The industry participants 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 mainly consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
3 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
Automation Boom a Tailwind: The requirement of faster, more powerful and energy-efficient electronics has been 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 growth in the industry. The increasing installation of collaborative robots, which add efficiency to production processes by working with production workers, will continue to benefit the 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 have been 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 have been driving the demand for solutions provided by the industry players.
Supply-Chain Disruptions Remain Worrisome: The industry players are reeling under the impacts of the coronavirus-induced macroeconomic woes. Supply chains have been disrupted by the social-distancing and shelter-in-place measures, owing to the pandemic, which, in turn, 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 concerns related to the economic downturn, which continues to wreak havoc on new bookings of the industry players. Increasing health risks and deaths related to the virus outbreak have made people more apprehensive about further disruptions, which, in turn, are hurting their spending patterns.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics – Testing Equipment industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #123, which places it in the top 48% 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 bullish 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Jun 30, 2021, the industry’s earnings estimates for the current year have moved up 3%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
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 6.6% over this period against the S&P 500 and broader sector’s rally of 29% and 30.3%, respectively.
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 18.24X versus the S&P 500’s 21.77X and sector’s 29.66X.
Over the past five years, the industry has traded as high as 25.33X, as low as 14.56X and recorded a median of 18.34X, which is depicted in the chart shown below.
Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Electronics - Miscellaneous Components Stocks to Buy
Littelfuse: The Chicago, IL-based company has been 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 #1 (Strong Buy) company is well-positioned to benefit from a 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 stocks here.
Littelfuse has gained 21.9% in the past year. The Zacks Consensus Estimate for LFUS’s 2021 earnings has been revised 9.2% upward to $12.95 per share over the past 60 days.
Price and Consensus: LFUS
nVent Electric: The London, United Kingdom-based company has been gaining from portfolio strength, and modular and digital platforms. Further, the company’s growth, profits and cash strategies remain noteworthy. Moreover, strengthening relationships with strategic channel partners are expected to continue benefiting the company.
The Zacks Rank #2 (Buy) company, which is a provider of electrical connection and protection solutions, remains optimistic about the strong demand for its products and solutions. Further, solid execution of its strategy across high-growth verticals, product introductions, global expansion and strategic acquisitions remain tailwinds.
nVent Electric has gained 57.8% in the past year. The Zacks Consensus Estimate for NVT’s 2021 earnings has been revised 2.6% upward to $1.95 per share over the past 60 days.
Price and Consensus: NVT
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. TEL is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.
TE Connectivity has gained 33.1% in the past year. The Zacks Consensus Estimate for TEL’s fiscal 2022 earnings has been unchanged at $6.99 per share over the past 60 days.
Price and Consensus: TEL