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IEC Electronics

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IEC Electronics Corp. (IEC - Free Report) , a leading provider of electronic manufacturing services (“EMS”), surpassed the Zacks Consensus Estimate by 15.8% in the third quarter of fiscal 2012, leading to some upward movement in analysts’ earnings estimates. This Zacks #2 Rank (Buy) stock also has a forward price-to-earnings (P/E) multiple of just 7.9 and a price-to-sales (P/S) multiple as low as 0.4, making it a true value pick.

Impressive Q3

IEC Electronics reported strong third quarter 2012 results on July 31 with earnings of 22 cents per share, which exceeded the Zacks Consensus Estimate by 3 cents or 15.8%. The better-than-expected earnings were primarily driven by strong revenue growth and margin expansion.

Revenue climbed 4.0% from the prior-year quarter to $36.0 million. Gross profit expanded 160 basis points to 20.6% driven by a favorable product mix. Operating margin expanded 220 basis points to 9.8%, primarily driven by a strong revenue base and lower operating expenses.

IEC Electronics expects organic sales to increase 9% to 14% for fiscal 2012. The company also reiterated its long-term annual organic growth target of 17%.

Earnings Estimates Moving Up

Earnings estimates have moved higher over the last 60 days. For 2012, the Zacks Consensus Estimate increased 1.3% to 76 cents, representing year-over-year growth of 33.3%. For 2013, the Zacks Consensus Estimate of 85 cents improved 2.4%, reflecting a year-over-year improvement of 11.2%.

Shares Remain Undervalued

In addition to low P/E and P/S multiples, the stock looks attractive with respect to its price-to-book (P/B) multiple of just 1.57. A P/E below 15.0, a P/S ratio less than 1.0 and a P/B ratio under 3.0 generally suggest a value stock. Moreover, its return on equity (ROE) of 20.6% is much higher than the peer group average of 8.5%.

New York-based IEC Electronics Corp. provides electronics manufacturing services on a contractual basis. It serves a number of sectors, including Military & Aerospace (56% of total revenue in fiscal 2011), Industrial & Communications (21% of total revenue in fiscal 2011) and Medical & Other (21% of total revenue in fiscal 2011).

IEC Electronics’ backlog jumped 33.0% to $121.5 million at the end of fiscal 2011. The company faces significant competition from Flextronics International Ltd. (FLEX), Benchmark Electronics Inc. (BHE) and Plexus Corp. (PLXS).

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