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3 Electronics Stocks With Upbeat Industry Prospects to Watch
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The Zacks Electronics - Miscellaneous Components industry is benefiting from the ongoing automation drive, and increased spending by manufacturers of semiconductors, automobiles, machineries and mobile phones. Notably, industry players like nVent Electric (NVT - Free Report) , Fabrinet (FN - Free Report) and Stoneridge (SRI - 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. Easing supply-chain constraints are also benefiting the industry participants.
However, a challenging global macroeconomic environment and end-market volatility worldwide are concerning for the underlined industry. Rising inflationary pressure, growing geopolitical tensions and foreign-currency headwinds are taking a toll on the industry players.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies providing various 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. Customers in this industry are mainly 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 for faster, more powerful and energy-efficient electronics leads to increased automation. Control systems, such as computers, and robots and information technologies for handling different processes and machinery, are driving the industry. The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will 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 for the industry.
Miniaturization Acts as a Key Advantage: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging, enabling the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of new device architectures, such as 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.
Macroeconomic Headwinds Pose Concerns: Rising inflationary pressure and fears of a global recession have negatively impacted the rate of deal wins. Due to the challenging macroeconomic scenario, enterprises are reluctant to sign multi-year deals worldwide. These trends do not bode well for the industry participants.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics – Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #102, placing it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, 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.
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 Sep 30, 2023, the industry’s earnings estimates for the current year have moved 45.2% up.
Before we present a few stocks worth considering for your portfolio, let’s look at the industry’s recent stock-market performance and the valuation picture.
Industry Underperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has underperformed the Zacks S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.
The industry has returned 4.7% over this period compared with the S&P 500’s growth of 22% and the broader sector’s rally of 45.1%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price to earnings, a commonly-used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 15.58X compared with the S&P 500’s 19.59X and the sector’s 24.02X.
In the past five years, the industry has traded as high as 25.99X, as low as 15.58X and recorded a median of 20.35X, depicted in the charts below.
Price/Earnings Ratio (F12M)
3 Electronics - Miscellaneous Components Stocks to Watch
nVent Electric: This London, U.K.-based entity, which is a provider of electrical connection and protection solutions, is optimistic about solid demand for its products and solutions. It is gaining from strength in modular and digital platforms. Further, strengthening relationships with strategic channel partners will continue to benefit it.
The Zacks Rank #2 (Buy) player is expected to keep delivering a strong financial performance on the back of its growth, profits and cash strategies. Moreover, the solid execution of its strategy across high-growth verticals, product introductions, global expansion and strategic acquisitions are tailwinds.
nVent Electric has gained 47.7% in the past year. The Zacks Consensus Estimate for NVT’s 2023 earnings has been revised 1.4% upward to $3.03 per share in the past 60 days.
Price and Consensus: NVT
Stoneridge: The Novi, MI-based company is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems for the automotive, medium and heavy-duty trucks, and agricultural vehicle markets.
The Zacks Rank #2 company is benefiting from its strong portfolio of technologies and vehicle systems that are aligned with the global industry megatrends. Stoneridge’s solid momentum across camera monitor system offerings, including MirrorEye, is a plus. In addition, the company is well-positioned to gain a footprint in the Europe market on the back of its latest Smart 2 Tachograph program for commercial vehicles.
Stoneridge has lost 19% in the past year. The Zacks Consensus Estimate for the company’s 2023 bottom line has narrowed from a loss per share of 20 cents to 10 cents in the past 60 days.
Price and Consensus: SRI
Fabrinet: The Bangkok, Thailand-based company offers advanced optical packaging, precision optical, and electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products. It is benefiting from a favorable demand environment. Further, a solid momentum across optical communications products is aiding Fabrinet’s financial performance.
The Zacks Rank #3 (Hold) player will likely remain on the growth trajectory, owing to the rising momentum across optical communications OEM customers. Increasing demand for optical communications components and modules, driven by growing outsourcing production activities to third parties by OEMs, remains a tailwind. The company’s strengthening AI product offerings are other tailwinds.
Fabrinet has gained 44.2% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings has been unchanged at $8.25 per share in the past 60 days.
Price and Consensus: FN
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3 Electronics Stocks With Upbeat Industry Prospects to Watch
The Zacks Electronics - Miscellaneous Components industry is benefiting from the ongoing automation drive, and increased spending by manufacturers of semiconductors, automobiles, machineries and mobile phones. Notably, industry players like nVent Electric (NVT - Free Report) , Fabrinet (FN - Free Report) and Stoneridge (SRI - 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. Easing supply-chain constraints are also benefiting the industry participants.
However, a challenging global macroeconomic environment and end-market volatility worldwide are concerning for the underlined industry. Rising inflationary pressure, growing geopolitical tensions and foreign-currency headwinds are taking a toll on the industry players.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies providing various 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. Customers in this industry are mainly 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 for faster, more powerful and energy-efficient electronics leads to increased automation. Control systems, such as computers, and robots and information technologies for handling different processes and machinery, are driving the industry. The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will 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 for the industry.
Miniaturization Acts as a Key Advantage: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging, enabling the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of new device architectures, such as 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.
Macroeconomic Headwinds Pose Concerns: Rising inflationary pressure and fears of a global recession have negatively impacted the rate of deal wins. Due to the challenging macroeconomic scenario, enterprises are reluctant to sign multi-year deals worldwide. These trends do not bode well for the industry participants.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics – Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #102, placing it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, 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.
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 Sep 30, 2023, the industry’s earnings estimates for the current year have moved 45.2% up.
Before we present a few stocks worth considering for your portfolio, let’s look at the industry’s recent stock-market performance and the valuation picture.
Industry Underperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has underperformed the Zacks S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.
The industry has returned 4.7% over this period compared with the S&P 500’s growth of 22% and the broader sector’s rally of 45.1%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price to earnings, a commonly-used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 15.58X compared with the S&P 500’s 19.59X and the sector’s 24.02X.
In the past five years, the industry has traded as high as 25.99X, as low as 15.58X and recorded a median of 20.35X, depicted in the charts below.
Price/Earnings Ratio (F12M)
3 Electronics - Miscellaneous Components Stocks to Watch
nVent Electric: This London, U.K.-based entity, which is a provider of electrical connection and protection solutions, is optimistic about solid demand for its products and solutions. It is gaining from strength in modular and digital platforms. Further, strengthening relationships with strategic channel partners will continue to benefit it.
The Zacks Rank #2 (Buy) player is expected to keep delivering a strong financial performance on the back of its growth, profits and cash strategies. Moreover, the solid execution of its strategy across high-growth verticals, product introductions, global expansion and strategic acquisitions are tailwinds.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
nVent Electric has gained 47.7% in the past year. The Zacks Consensus Estimate for NVT’s 2023 earnings has been revised 1.4% upward to $3.03 per share in the past 60 days.
Price and Consensus: NVT
Stoneridge: The Novi, MI-based company is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems for the automotive, medium and heavy-duty trucks, and agricultural vehicle markets.
The Zacks Rank #2 company is benefiting from its strong portfolio of technologies and vehicle systems that are aligned with the global industry megatrends. Stoneridge’s solid momentum across camera monitor system offerings, including MirrorEye, is a plus. In addition, the company is well-positioned to gain a footprint in the Europe market on the back of its latest Smart 2 Tachograph program for commercial vehicles.
Stoneridge has lost 19% in the past year. The Zacks Consensus Estimate for the company’s 2023 bottom line has narrowed from a loss per share of 20 cents to 10 cents in the past 60 days.
Price and Consensus: SRI
Fabrinet: The Bangkok, Thailand-based company offers advanced optical packaging, precision optical, and electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products. It is benefiting from a favorable demand environment. Further, a solid momentum across optical communications products is aiding Fabrinet’s financial performance.
The Zacks Rank #3 (Hold) player will likely remain on the growth trajectory, owing to the rising momentum across optical communications OEM customers. Increasing demand for optical communications components and modules, driven by growing outsourcing production activities to third parties by OEMs, remains a tailwind. The company’s strengthening AI product offerings are other tailwinds.
Fabrinet has gained 44.2% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings has been unchanged at $8.25 per share in the past 60 days.
Price and Consensus: FN