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Supply-chain disruptions and end-market dynamics across the world, owing to the pandemic, have affected the Zacks Electronics - Miscellaneous Components industry. Depressed automotive, industrial, and linear markets are weighing heavily on the industry’s prospects.
However, TE Connectivity, Littelfuse, Vicor Corp and Vishay Precision remain 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 as well as consumer electronics. Its customers mainly consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
4 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
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, has 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 the 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.
Labor Shortages – A Concern: The Coronavirus outbreak-induced labor shortages are continuously impacting the production capacity of electronic companies. The companies are struggling to meet the rising demand as a result of the reopening of economies, owing to worker absenteeism and short-term shutdowns. The shortage of labor is dampening the growth prospects of the industry participants by increasing their lead times.
Automation Boom a Tailwind: The requirement of faster, more powerful and energy-efficient electronics is 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 growing 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 & autonomous vehicles is expected to drive growth of the industry.
Miniaturization Remains a Key Factor: The industry participants are 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 are driving the demand for solutions provided by the industry players.
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 #171, which places it in the bottom 32% 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 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.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
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 gained 27.7% over this period versus the S&P 500 and broader sector’s rally of 35.7% and 41.1%, respectively.
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 19.77X versus the S&P 500’s 21.59X and sector’s 23.61X.
Over the past five years, the industry has traded as high as 23.77X, as low as 14.36X and recorded a median of 17.71X, which is depicted in the charts shown below.
4 Electronics - Miscellaneous Components Stocks to Buy
Littelfuse: The Chicago, IL-based company is 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 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 46.5% in the past year. The Zacks Consensus Estimate for its 2021 earnings has been revised 23.4% upward to $11.09 per share over the past 30 days.
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 #2 (Buy) company, which manufactures and designs products that connect and protect the flow of power and data inside millions of products used by consumers and industries, is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.
TE Connectivity has improved 64.2% in the past year. The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised 4.4% upward to $6.42 per share over the past 30 days.
Vicor Corporation: The Andover, MA-based company is expected to keep benefiting from solid demand for its advanced products, driven by rising shipments of lateral power solutions for AI acceleration. Solid execution and disciplined cost-management actions remain major positives.
The Zacks Rank #2 company is well-positioned to benefit from its huge customer base and new high-density AC front end products. Its improving manufacturing efficiencies along with the vertical integration of power packaging processes and increased capacity in expanded facilities are expected to remain tailwinds.
Vicor has gained 40.3% in the past year. The Zacks Consensus Estimate for its 2021 earnings has been revised 10.1% upward to $1.64 per share over the past 30 days.
Vishay Precision: The Malvern, PA-located company is a leading developer of resistive foil technology products (such as sensors) for a wide variety of applications. The company is benefiting from strength in advanced sensors products. Its robust consumer application and precision agriculture remain other positives.
The Zacks Rank #2 company is gaining from increased orders in the avionic, military, and test and measurement markets.
Vishay Precision has gained 42.2% over a year. The Zacks Consensus Estimate for its 2021 earnings has been unchanged at $1.45 per share over the past 30 days.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: TE Connectivity, Littelfuse, Vicor Corp and Vishay Precision
For Immediate Release
Chicago, IL – August 3, 2021 – Today, Zacks Equity Research discusses Electronics - Miscellaneous Components, including TE Connectivity Ltd. (TEL - Free Report) , Littelfuse, Inc. (LFUS - Free Report) , Vicor Corporation (VICR - Free Report) and Vishay Precision Group, Inc. (VPG - Free Report) .
Link: https://www.zacks.com/commentary/1772545/4-electronics-stocks-to-escape-pandemic-led-disruptions
Supply-chain disruptions and end-market dynamics across the world, owing to the pandemic, have affected the Zacks Electronics - Miscellaneous Components industry. Depressed automotive, industrial, and linear markets are weighing heavily on the industry’s prospects.
However, TE Connectivity, Littelfuse, Vicor Corp and Vishay Precision remain 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 as well as consumer electronics. Its customers mainly consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
4 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
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, has 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 the 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.
Labor Shortages – A Concern: The Coronavirus outbreak-induced labor shortages are continuously impacting the production capacity of electronic companies. The companies are struggling to meet the rising demand as a result of the reopening of economies, owing to worker absenteeism and short-term shutdowns. The shortage of labor is dampening the growth prospects of the industry participants by increasing their lead times.
Automation Boom a Tailwind: The requirement of faster, more powerful and energy-efficient electronics is 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 growing 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 & autonomous vehicles is expected to drive growth of the industry.
Miniaturization Remains a Key Factor: The industry participants are 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 are driving the demand for solutions provided by the industry players.
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 #171, which places it in the bottom 32% 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 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.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
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 gained 27.7% over this period versus the S&P 500 and broader sector’s rally of 35.7% and 41.1%, respectively.
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 19.77X versus the S&P 500’s 21.59X and sector’s 23.61X.
Over the past five years, the industry has traded as high as 23.77X, as low as 14.36X and recorded a median of 17.71X, which is depicted in the charts shown below.
4 Electronics - Miscellaneous Components Stocks to Buy
Littelfuse: The Chicago, IL-based company is 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 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 46.5% in the past year. The Zacks Consensus Estimate for its 2021 earnings has been revised 23.4% upward to $11.09 per share over the past 30 days.
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 #2 (Buy) company, which manufactures and designs products that connect and protect the flow of power and data inside millions of products used by consumers and industries, is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.
TE Connectivity has improved 64.2% in the past year. The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised 4.4% upward to $6.42 per share over the past 30 days.
Vicor Corporation: The Andover, MA-based company is expected to keep benefiting from solid demand for its advanced products, driven by rising shipments of lateral power solutions for AI acceleration. Solid execution and disciplined cost-management actions remain major positives.
The Zacks Rank #2 company is well-positioned to benefit from its huge customer base and new high-density AC front end products. Its improving manufacturing efficiencies along with the vertical integration of power packaging processes and increased capacity in expanded facilities are expected to remain tailwinds.
Vicor has gained 40.3% in the past year. The Zacks Consensus Estimate for its 2021 earnings has been revised 10.1% upward to $1.64 per share over the past 30 days.
Vishay Precision: The Malvern, PA-located company is a leading developer of resistive foil technology products (such as sensors) for a wide variety of applications. The company is benefiting from strength in advanced sensors products. Its robust consumer application and precision agriculture remain other positives.
The Zacks Rank #2 company is gaining from increased orders in the avionic, military, and test and measurement markets.
Vishay Precision has gained 42.2% over a year. The Zacks Consensus Estimate for its 2021 earnings has been unchanged at $1.45 per share over the past 30 days.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.