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Amphenol (APH) Hits a New 52-Week High on Holistic Growth

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Shares of diversified electronics manufacturer Amphenol Corporation (APH - Free Report) scaled a new 52-week high of $61.52 on Aug 22, before closing the trading session a notch lower at $61.50 for a healthy year-to-date return of 17.8%. Barring minor hiccups, Amphenol’s share price has steadily been on an uptrend since July this year. This Zacks Rank #2 (Buy) stock is currently trading at a forward P/E of 23.3x and has a long-term earnings growth expectation of 6.9%.

Growth Drivers

Amphenol’s top-line growth is benefiting from improved end-market demand, new product rollouts and market share gains. Demand continues to be strong in the automotive, industrial, mobile networks and military markets. The diversification in end markets, with a consistent focus on technology innovation and customer support through all phases of the economic cycle, enable the company to post robust results. A sustained drive for geographic and market diversification has further helped Amphenol to expand its customer base and develop new applications.

Amphenol remains encouraged by its expanding presence in the fast-growing commercial aerospace market and is well positioned to capitalize on the proliferation of electronics content on next-generation planes. These advanced electronic systems require new higher technology interconnect solutions to enhance fuel efficiency and improve passenger experience, all of which create excellent opportunities for Amphenol.

In order to fuel growth, Amphenol aims to make acquisitions on a global basis in the high-growth segments that have complementary capabilities from a product, customer and/or geographic standpoint. Subsequent to second-quarter 2016, Amphenol completed the acquisition of two companies, AUXEL FTG (Auxel) and Custom Cable, as part of its strategic acquisition program. Based in France, Auxel is a leading manufacturer of power busbars and power interconnect solutions worldwide. The company has annual sales of approximately $50 million. On the other hand, Custom Cable is a Florida-based firm with annual sales of approximately $30 million, offering fiber optic and copper cable assemblies. The company expects these acquisitions to strengthen its global foothold and enhance its product offering in strategic markets.

Despite the uncertainties prevailing in the global economy, Amphenol has bullish revenue and earnings expectations. The ongoing revolution in electronics enables the company to capitalize on the opportunities and strengthen its position in the market. For 2016, the company expects sales in the range of $6.120 billion to $6.200 billion, representing a year-over-year increase of 10% to 11%. The company had earlier expected sales in the range of $6.080 billion to $6.200 billion. Earnings are expected to be in the range of $2.60 to $2.64 per share, an increase of 7% to 9% year over year, including the accretive effect from the Auxel acquisition. Previously, the company had expected earnings for 2016 in the range of $2.56 to $2.62 per share. Such a bullish outlook with continued growth impetus and core focus boost investors’ confidence and catapult share prices to newer 52-week highs.

Other Stocks to Consider

Other stocks that look promising in the same industry include BWX Technologies, Inc. BWXT, AU Optronics Corp. AUO and Active Power Inc. ACPW, each carrying the same Zacks Rank as Amphenol.

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