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Amphenol Hits 52-Week High on Favorable Growth Prospects

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Shares of diversified electronics manufacturer Amphenol Corporation (APH - Free Report) scaled a new 52-week high of $66.94 on Nov 8, before closing the trading session a notch lower at $66.81 for a healthy year-to-date return of 27.9%. Barring minor hiccups, Amphenol’s share price has steadily been on an uptrend since July. This Zacks Rank #2 (Buy) stock is currently trading at a forward P/E of 24.7x and has a long-term earnings growth expectation of 7.9%.

Growth Drivers

Amphenol reported strong third-quarter 2016 results with healthy year-over-year increase in both earnings and revenues that exceeded the respective Zacks Consensus Estimate. The improved performance was mostly driven by organic growth across all markets except mobile devices and solid inorganic growth.

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, enabled 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 CORP-A Price and Consensus

 

AMPHENOL CORP-A Price and Consensus | AMPHENOL CORP-A Quote

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. During the third quarter, the company acquired All Systems Broadband as part of its strategic acquisition program. Based in California, All Systems Broadband is a leading manufacturer of cable assemblies and value added fiber optic products for the broadband market with annual sales of approximately $40 million. Subsequent to the end of the quarter, Amphenol also acquired SGX Sensortech, a Switzerland-based manufacturer of air quality sensors that are used in a variety of automotive and industrial applications. It has annual sales of approximately $15 million. 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. It also expects to leverage on the solid growth potential of the acquired companies to drive robust performance in the future.

For 2016, the company increased its guidance on the back of favorable growth dynamics. Amphenol currently expects sales in the range of $6.220 billion to $6.260 billion, representing a year-over-year increase of 12%. The company earlier expected sales in the range of $6.120 billion to $6.200 billion. It currently expects GAAP earnings per share in the range of $2.57 to $2.59, an increase of 7% year over year. Previously, the company expected GAAP earnings for 2016 in the range of $2.51 to $2.55 per share. Adjusted earnings are expected to be within $2.68 to $2.70 per share, an increase of 10% to 11% year over year, from the earlier projections of $2.60 to $2.64.

Such a bullish outlook with continued growth impetus and core focus boosted investors’ confidence and catapulted share prices to a new 52-week high.

Other Stocks to Consider

Some other favorably ranked stocks in the same space include Applied Industrial Technologies, Inc. (AIT - Free Report) , Ingersoll-Rand Plc (IR - Free Report) and Kadant Inc. (KAI - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Industrial has long-term earnings growth expectations of 12% and is currently trading at a forward P/E of 19.5x.

Ingersoll-Rand has a positive earnings surprise history with an average of 12.9% in the trailing four quarters, comprehensively beating estimates in each quarter.

Kadant has a positive earnings surprise history with an average of 27.7% in the trailing four quarters, comprehensively beating estimates in each quarter.

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