MOLX Molex Incorporated (MM)

We recently reiterated our Neutral recommendation on Amphenol Corporation (APH), which designs, manufactures and markets electronic and fiber optic connectors, interconnect systems and coaxial and high-speed specialty cable.

Amphenol is successfully translating improvement in end-market demand, new product rollouts, and market share gains into top-line growth. The majority of end-markets are poised to grow with signs of economic recovery. The company is also optimistic about the accelerating proliferation of new electronics in all its end markets.

We believe that the prospects in the business of mobile devices will fuel the company’s long -term growth. Besides mobile phones, the company continues to increase the use of its products into the fast growing sub-markets such as PDAs, laptops, and desktop computers.  Additionally, a recovery in commercial aerospace production (expected in 2011) will enhance the company’s business.

Amphenol’s global presence provides a competitive edge as it enables the company to provide quality products at a lower cost to its multinational customers. Moreover, Amphenol also has the advantage of low-cost manufacturing and assembly facilities in China, Mexico, India, Eastern Europe, and Africa for serving regional and world markets. 

Furthermore, the company’s operational execution has resulted in improved margins compared with its peers, such as Molex (MOLX) and Tyco Electronics (TEL), along with strong cash flow generation.

Amphenol posted a net income of 72 cents per share in the first quarter of 2011, compared with 56 cents in the year-ago quarter, beating the Zacks Consensus Estimate by a penny. Net income jumped 30.1% year over year to $127.9 million.

For the second quarter of fiscal 2011, the company projects sales between $985 million and $1,000 million, encouraged by the improvement in global demand coupled with the stabilization of demand patterns. Earnings per share are estimated between 76 cents and 78 cents.

For fiscal 2011, management now projects revenues between $3,955 million and $4,000 million, up from the previous estimate of $3,885 million and $3,960 million.  EPS is expected between $3.05 and $3.11, up from the previous estimate of $3.00-$3.10.

However, earnings estimates for 2011 have been static in the last ninety days. Gross margin has been under pressure in the last few quarters due to higher commodity costs.

We continue to maintain a Neutral recommendation on Amphenol. Based on better-than-expected results of the first quarter of 2011 and upgraded guidance for fiscal 2011, we currently have a Zacks #2 Rank (short-term Buy rating) on the stock.

 
AMPHENOL CORP-A (APH): Free Stock Analysis Report
 
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TE CONNECT-LTD (TEL): Free Stock Analysis Report
 
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