On Jan 24, we upgraded our long-term recommendation on
diversified electronics manufacturer
) from Neutral to Outperform, encouraged by its strong fourth
quarter 2013 results and bullish guidance. A balanced organic and
inorganic growth model, a lean and flexible cost structure, and
an agile and entrepreneurial management team are some of the
catalysts driving the stock.
Why the Upgrade?
Amphenol reported phenomenal fourth quarter 2013 results with
record revenues of $1,245.7 million and all-time high recurring
earnings of $1.05 per share. Despite the uncertainties prevailing
in the global economy, Amphenol projected revenues between $5.0
billion and $5.12 billion for full year 2014. Recurring earnings
per share for 2014 are pegged in a band of $4.15 to $4.27. Both
revenue and recurring earnings guidance represent a healthy
8%-11% year-over-year 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 Aerospace, Industrial and Broadband
Communications. The company is also boosting its Information
Technology and Data Communication segment with various product
innovations. The diversification in end markets with a consistent
focus on technology innovation and customer support through all
phases of the economic cycle further enables the company to post
strong results. A sustained drive for geographic and market
expansion has enabled Amphenol to reach out to new customers and
offer new applications.
Over the years, Amphenol has also witnessed a significant
inorganic growth. During the fourth quarter of 2013, Amphenol
acquired four companies for a sum of $455 million, including the
Advanced Sensors business of
General Electric Company
) for approximately $318 million. The Advanced Sensors unit is a
supplier of highly engineered sensors and sensor-based
instruments, and complements Amphenol's core interconnects
offering. The company is optimistic on these purchases, which it
believes will create significant shareholder value going forward.
In order to fuel further growth, 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. We remain impressed by the company's activity on the
acquisition front and its integration skills.
Other Stocks to Consider
Amphenol currently has a Zacks Rank #2 (Buy). Some other players
in the industry worth reckoning include
IEC Electronics Corp.
TE Connectivity Ltd.
), both of which carry a comparable Zacks Rank #2 (Buy).
AMPHENOL CORP-A (APH): Free Stock Analysis
GENL ELECTRIC (GE): Free Stock Analysis
IEC ELECTRS NEW (IEC): Free Stock Analysis
TE CONNECT-LTD (TEL): Free Stock Analysis
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