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Electronics Testing Equipment Industry Outlook Appears Dull
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The Zacks Electronics -Testing Equipment Industry comprises companies that offer advanced instruments, electronic testing equipment solutions, thermal management systems, electrical connectors, motors and various test solutions.
The emergence of software-enabled testing instruments and devices remains a positive for the industry participants. In fact, the ongoing digital wave has led to increasing usage of electronic devices in almost every major sector — consumer, automobile, industrial, aerospace & defense, healthcare, semiconductors and communications.
Here are the three major themes in the industry:
The industry players are reeling under the impact of the coronavirus (COVID-19)-induced macroeconomic woes. The supply chain has been disrupted by social distancing and shelter-in-place restrictions owing to the ongoing pandemic, which in turn has severely impacted these companies. Although economies are gradually reopening in several parts of the world, production delays remain a concern. Moreover, the panoptic impact of the COVID-19-led crisis has aggravated apprehensions regarding an imminent recession, which continues to wreak havoc on new bookings of the industry players, including prominent ones like Fortive (FTV - Free Report) and AMETEK (AME - Free Report) .
The rapid adoption of IoT technology, and the emergence of 5G technology and its accelerating deployment presentsolid prospects for the industry participants. Moreover, the industry is anticipated to remain on growth trajectory backed by strong efforts made toward the ongoing modification of the Internet infrastructure, IoT supported industrial automation and evolution of smart cars & autonomous vehicle. Further, robust demand for collaborative robots, which add efficiency to the production process by working with the production workers, will benefit the industry.
The industry participants have been gaining from increasing usage of electronic testequipment and software in the interrogation of biological properties of molecules and cells in clinical and medical science research work. Rapid adoption of these is anticipated to drive growth for the industry players in the healthcare end-market. We note that Agilent Technologies (A - Free Report) , a dominant player, is capitalizing on this trend and gaining traction in the life science research space. However, COVID-19-led economic disruptions have been taking a toll on this domain of the industry. Notably, sluggish demand for electronic equipment parts across most end markets and non-COVID-19 diagnostic testing labs is a major headwind. For instance, Agilent is suffering from declining equipment purchases by customers amid this pandemic.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Electronics – Testing Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #200, which places it at the bottom 21% of 252 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates weak 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.
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 Beats S&P 500, Lags Sector
The Zacks Electronics – Testing Equipment Industry has outperformed the Zacks S&P 500 composite but underperformed the broader Zacks Computer and Technology sector in the past year.
The stocks in this industry have collectively gained 7.5% compared with the Zacks S&P 500’s and the Zacks Computer and Technology sector’s rally of 6.2% and 8.2%, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings ratio (P/E), which is a commonly used multiple for valuing Electronics – Testing Equipment stocks, the industry is currently trading at 26.37X, higher than the S&P 500’s 22.38X and the sector’s 25.78X.
Over the past five years, the industry has traded as high as 26.37X and as low as 18.30X, with the median being at 22.03X, as the chart below shows.
Forward 12-Month P/E Ratio
Bottom Line
Growth prospects revolving around IoT, AI, autonomous vehicles, automation and 5G remain encouraging. However, the industry is currently grappling with apprehensions regarding the second wave of COVID-19.
However, we present three stocks with a Zacks Rank #3 (Hold) that investors may currently keep an eye on.
Palo Alto, CA-based Agilent Technologies is an original equipment manufacturer of a broad-based portfolio of test and measurement products serving multiple end markets. The Zacks Consensus Estimate for 2020 earnings has improved 0.6% to $3.11 per share over the past 30 days.
Price and Consensus: A
AMETEK based in Berwyn, PA is the manufacturer of electronic appliances and electromechanical devices. Notably, the Zacks Consensus Estimate for its 2020 earnings has remained stable at $3.53 per share over the past 30 days.
Price and Consensus: AME
Teradyne (TER - Free Report) based in North Reading, MA is a leading provider of automated test equipment. It also offers specialized system testing equipment. The Zacks Consensus Estimate for its 2020 earnings has remained steady at $3.08 per share over the past 30 days.
Price and Consensus: TER
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Electronics Testing Equipment Industry Outlook Appears Dull
The Zacks Electronics -Testing Equipment Industry comprises companies that offer advanced instruments, electronic testing equipment solutions, thermal management systems, electrical connectors, motors and various test solutions.
The emergence of software-enabled testing instruments and devices remains a positive for the industry participants. In fact, the ongoing digital wave has led to increasing usage of electronic devices in almost every major sector — consumer, automobile, industrial, aerospace & defense, healthcare, semiconductors and communications.
Here are the three major themes in the industry:
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Electronics – Testing Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #200, which places it at the bottom 21% of 252 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates weak 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.
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 Beats S&P 500, Lags Sector
The Zacks Electronics – Testing Equipment Industry has outperformed the Zacks S&P 500 composite but underperformed the broader Zacks Computer and Technology sector in the past year.
The stocks in this industry have collectively gained 7.5% compared with the Zacks S&P 500’s and the Zacks Computer and Technology sector’s rally of 6.2% and 8.2%, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings ratio (P/E), which is a commonly used multiple for valuing Electronics – Testing Equipment stocks, the industry is currently trading at 26.37X, higher than the S&P 500’s 22.38X and the sector’s 25.78X.
Over the past five years, the industry has traded as high as 26.37X and as low as 18.30X, with the median being at 22.03X, as the chart below shows.
Forward 12-Month P/E Ratio
Bottom Line
Growth prospects revolving around IoT, AI, autonomous vehicles, automation and 5G remain encouraging. However, the industry is currently grappling with apprehensions regarding the second wave of COVID-19.
None of the stocks in the Electronics – Testing Equipment industry currently sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
However, we present three stocks with a Zacks Rank #3 (Hold) that investors may currently keep an eye on.
Palo Alto, CA-based Agilent Technologies is an original equipment manufacturer of a broad-based portfolio of test and measurement products serving multiple end markets. The Zacks Consensus Estimate for 2020 earnings has improved 0.6% to $3.11 per share over the past 30 days.
Price and Consensus: A
AMETEK based in Berwyn, PA is the manufacturer of electronic appliances and electromechanical devices. Notably, the Zacks Consensus Estimate for its 2020 earnings has remained stable at $3.53 per share over the past 30 days.
Price and Consensus: AME
Teradyne (TER - Free Report) based in North Reading, MA is a leading provider of automated test equipment. It also offers specialized system testing equipment. The Zacks Consensus Estimate for its 2020 earnings has remained steady at $3.08 per share over the past 30 days.
Price and Consensus: TER
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>