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Amphenol Corporation, a Zacks Rank #1 (Strong Buy), just delivered one of the most impressive quarters any component supplier has produced in this cycle.
The connector and interconnect specialist crossed $10 billion in quarterly sales for the first time in its history, and it did so while orders nearly doubled. For a company founded in 1932, that is a remarkable late-career acceleration.
What makes Amphenol worth your attention is that it offers exposure to the artificial intelligence buildout without requiring you to pick which chip architecture wins. Every accelerator, every rack and every data center needs interconnect. Amphenol sells it to all of them.
Amphenol is part of the Zacks Electronics – Connectors industry group, which currently ranks in the top 5% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are projected to experience above-average earnings growth, which is one of the most reliable precursors to higher stock prices over time.
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Amphenol designs, manufactures and markets electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and coaxial cable. Its products reach an unusually broad set of end markets: communications infrastructure, data centers, automotive, commercial aerospace, defense, industrial and mobile devices. The company is headquartered in Wallingford, Connecticut.
That breadth is the structural argument. Amphenol operates through a decentralized model of more than one hundred general managers who run their businesses with considerable autonomy. It is an unusual structure for a company of this scale, and it has produced a long record of successful bolt-on acquisitions that larger, more centralized competitors have struggled to replicate.
The AI opportunity sits squarely in the IT Datacom business. As compute density rises inside the rack, the interconnect problem gets harder rather than easier. Higher speeds demand better signal integrity, tighter tolerances and more sophisticated cable assemblies. That is a content-per-rack story, which means Amphenol's revenue can grow faster than unit volumes — exactly what has been happening.
Record Results and Rising Estimates
Amphenol (APH - Free Report) reported third-quarter results on October 28th that beat on both lines by a wide margin. Adjusted earnings of $0.80 per share topped the $0.73 Zacks Consensus Estimate by 9.59% and grew roughly 70% from the $0.47 posted a year earlier. Revenue reached a record $10.23 billion, up about 65% from $6.19 billion and ahead of expectations by 8.37%.
The order book is the number that warrants a closer look. Orders rose 99% year over year, and AI-related datacom revenue grew 117%, with the broader IT Datacom business up 77% on an organic basis. Orders of that magnitude do not reflect a single large shipment; they reflect customers reserving capacity well into next year.
Management's guidance tells the same story. For the fourth quarter, Amphenol guided to adjusted earnings of $0.81 to $0.83 per share on revenue of $10.3 to $10.5 billion. The consensus heading into the print stood at $0.75 on roughly $9.7 billion. That is a substantial guidance raise well above where the Street was modeling, and it implies another sequential record.
The full-year picture moved up accordingly, with the company guiding to $2.82 to $2.84 per share on $36.9 to $37.1 billion in revenue against a consensus near $2.69 and $35.7 billion. Analysts have been scrambling to catch up, and several firms raised price targets in the days following the report.
Image Source: Zacks Investment Research
Let's Get Technical
APH shares remain above an upward-sloping 200-day (red line) moving average, and the stock has held up much better through the recent AI sell-off compared to most related companies. Stocks that weather volatility well tend to lead the next leg up. The reaction to the October report came on expanded volume, which tells us institutions were adding rather than taking profits into strength.
Image Source: StockCharts
Only stocks in genuinely powerful uptrends make this type of move and sustain it. This is the kind of name we want in the portfolio — one that is trending well and receiving positive earnings estimate revisions at the same time.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As long as that trend remains intact and Amphenol continues to deliver earnings beats, the stock should continue its bullish run.
Bottom Line
Backed by a top 5% industry group, a long history of beats on both the top and bottom lines, and a guidance raise that sits well above where analysts were modeling, it isn't difficult to see why this company is a compelling investment right now.
Amphenol carries a Zacks Rank #1 (Strong Buy) driven by favorable estimate momentum. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. If you haven't already done so, be sure to put APH on your watchlist.
Bull of the Day: Amphenol (APH)
Amphenol Corporation, a Zacks Rank #1 (Strong Buy), just delivered one of the most impressive quarters any component supplier has produced in this cycle.
The connector and interconnect specialist crossed $10 billion in quarterly sales for the first time in its history, and it did so while orders nearly doubled. For a company founded in 1932, that is a remarkable late-career acceleration.
What makes Amphenol worth your attention is that it offers exposure to the artificial intelligence buildout without requiring you to pick which chip architecture wins. Every accelerator, every rack and every data center needs interconnect. Amphenol sells it to all of them.
Amphenol is part of the Zacks Electronics – Connectors industry group, which currently ranks in the top 5% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are projected to experience above-average earnings growth, which is one of the most reliable precursors to higher stock prices over time.
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Amphenol designs, manufactures and markets electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and coaxial cable. Its products reach an unusually broad set of end markets: communications infrastructure, data centers, automotive, commercial aerospace, defense, industrial and mobile devices. The company is headquartered in Wallingford, Connecticut.
That breadth is the structural argument. Amphenol operates through a decentralized model of more than one hundred general managers who run their businesses with considerable autonomy. It is an unusual structure for a company of this scale, and it has produced a long record of successful bolt-on acquisitions that larger, more centralized competitors have struggled to replicate.
The AI opportunity sits squarely in the IT Datacom business. As compute density rises inside the rack, the interconnect problem gets harder rather than easier. Higher speeds demand better signal integrity, tighter tolerances and more sophisticated cable assemblies. That is a content-per-rack story, which means Amphenol's revenue can grow faster than unit volumes — exactly what has been happening.
Record Results and Rising Estimates
Amphenol (APH - Free Report) reported third-quarter results on October 28th that beat on both lines by a wide margin. Adjusted earnings of $0.80 per share topped the $0.73 Zacks Consensus Estimate by 9.59% and grew roughly 70% from the $0.47 posted a year earlier. Revenue reached a record $10.23 billion, up about 65% from $6.19 billion and ahead of expectations by 8.37%.
The order book is the number that warrants a closer look. Orders rose 99% year over year, and AI-related datacom revenue grew 117%, with the broader IT Datacom business up 77% on an organic basis. Orders of that magnitude do not reflect a single large shipment; they reflect customers reserving capacity well into next year.
Management's guidance tells the same story. For the fourth quarter, Amphenol guided to adjusted earnings of $0.81 to $0.83 per share on revenue of $10.3 to $10.5 billion. The consensus heading into the print stood at $0.75 on roughly $9.7 billion. That is a substantial guidance raise well above where the Street was modeling, and it implies another sequential record.
The full-year picture moved up accordingly, with the company guiding to $2.82 to $2.84 per share on $36.9 to $37.1 billion in revenue against a consensus near $2.69 and $35.7 billion. Analysts have been scrambling to catch up, and several firms raised price targets in the days following the report.
Image Source: Zacks Investment Research
Let's Get Technical
APH shares remain above an upward-sloping 200-day (red line) moving average, and the stock has held up much better through the recent AI sell-off compared to most related companies. Stocks that weather volatility well tend to lead the next leg up. The reaction to the October report came on expanded volume, which tells us institutions were adding rather than taking profits into strength.
Image Source: StockCharts
Only stocks in genuinely powerful uptrends make this type of move and sustain it. This is the kind of name we want in the portfolio — one that is trending well and receiving positive earnings estimate revisions at the same time.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As long as that trend remains intact and Amphenol continues to deliver earnings beats, the stock should continue its bullish run.
Bottom Line
Backed by a top 5% industry group, a long history of beats on both the top and bottom lines, and a guidance raise that sits well above where analysts were modeling, it isn't difficult to see why this company is a compelling investment right now.
Amphenol carries a Zacks Rank #1 (Strong Buy) driven by favorable estimate momentum. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. If you haven't already done so, be sure to put APH on your watchlist.