It has been about a month since the last earnings report for Amphenol Corporation (APH - Free Report) . Shares have added about 7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Amphenol Beats Q2 Earnings, Raises Dividend & Guidance
Amphenol reported all-time high second-quarter 2017 results with healthy year-over-year increases in both earnings and revenues. GAAP earnings for the reported quarter were $251.5 million or 80 cents per share compared with $206.5 million or 65 cents per share in the year-earlier quarter. The upside was primarily driven by higher revenues.
Adjusted earnings for the quarter came in at $255.2 million or 81 cents compared with $206.5 million or 65 cents in the year-ago quarter. Adjusted earnings for the reported quarter exceeded the Zacks Consensus Estimate by 9 cents.
The company recorded all-time high revenues of $1,666.5 million compared with $1,548.2 million in the year-ago quarter and ahead of the Zacks Consensus Estimate of $1,604 million. The improved revenue performance was mostly driven by solid growth across automotive, military, industrial, information technology and data communications, and broadband markets, partially offset by lower demand in the mobile device market. The year-over-year revenue improvement was attributable to healthy organic and inorganic growth of the company.
Adjusted operating margin was 20.4% for the quarter due to diligent cost-management efforts.
Segment-wise, Cable business sales were $107.2 million in the reported quarter compared with $92.2 million in the year-ago quarter. Sales from the Interconnect business, which accounted for 93.6% of total sales were $1,559.3 million compared with $1,456.0 million in the prior year.
Operating income from the Interconnect business improved to $348.4 million during the quarter from $309.0 million a year ago. Operating income from the Cable business increased to $16.0 million from $13.7 million in the prior-year period.
In order to fuel its growth engine, Amphenol aims to acquire on a global basis in the high-growth segments that have complementary capabilities from a product, customer and/or geographic standpoint. During the quarter, the company acquired three sensor-related businesses from Meggitt PLC for an undisclosed amount. With annual sales of approximately $75 million, the Meggitt sensor businesses offer vibration and position sensors as well as ultrasonic transducers for industrial, automotive and military applications. Amphenol also acquired German firm Intelligente Sensorsysteme Dresden GmbH, which produces pressure, temperature and mass airflow sensors for automotive and industrial applications and has annual sales of approximately $45 million.
Subsequent to the end of the quarter, Amphenol acquired Telect, Inc., a leading manufacturer of DC power distribution as well as fiber and copper interconnect products for data centers in the broadband, information technology and data communications and mobile networks markets with annual sales of approximately $45 million.
The company expects the acquisitions to strengthen its global foothold and enhance its product offering in strategic markets.
Balance Sheet & Cash Flow
Amphenol generates solid cash flow, which gives management the opportunity to invest in product innovations, acquisitions and business development. At the same time, the company has historically returned significant cash through a combination of share repurchases and dividend to its shareholders. During the quarter, Amphenol repurchased approximately 2 million shares pursuant to its stock repurchase plan for the purchase of up to $1 billion worth of shares.
Cash and cash equivalents were $1,316.9 million at quarter end with long-term debt (excluding current portion) of $3,020.6 million. Cash flow from operations for the first half of 2017 was $518.2 million compared with $437.8 million in the prior-year period. Amphenol also increased its quarterly dividend by 19% year over year to 19 cents per share.
2017 Guidance Up
Despite the uncertainties prevailing in the global economy, Amphenol has bullish revenue and earnings expectations and raised its earlier guidance for 2017. The ongoing revolution in electronics enables the company to capitalize on the opportunities and strengthen its position in the market. Amphenol also expects to leverage on the solid growth potential of the acquired companies to drive robust performance in the future.
Amphenol expects third-quarter 2017 sales in the range of $1.700 billion to $1.740 billion. GAAP earnings are expected to be in the range of 77 cents to 79 cents per share.
For 2017, Amphenol currently expects sales in the range of $6.620 billion to $6.700 billion, representing a year-over-year increase of 5–7%. The company expects adjusted earnings per share in the range of $3.06 to $3.10, an increase of 13–14% year over year. This represents a healthy improvement to prior guidance of $6.405 billion to $6.525 billion in sales and adjusted earnings of $2.91 to $2.97 per share.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
At this time, Amphenol's stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a F. The stock was allocated also a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.