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Amphenol Q4 Earnings Beat on Holistic Growth, Outlook Solid

Diversified electronics manufacturer Amphenol CorporationAPH reported strong fourth-quarter 2015 results with earnings of 63 cents per share, which exceeded the Zacks Consensus Estimate by 4 cents. However, on a year-over-year basis, adjusted earnings per share remained flat.

Net income for the quarter came in at $200.1 million, compared with $193.5 million in the year-ago quarter. The year-over-year increase in earnings was driven by acquisition-related expenses in fourth-quarter 2014.

Impressive growth in the quarter was primarily attributable to Amphenol's technology leadership and market and geographic diversification. It further reflected the company's balanced organic and inorganic growth model. This was achieved on the back of a lean and flexible cost structure and an agile and entrepreneurial management team.

For full year 2015, Amphenol reported GAAP net income of $763.5 million or $2.41 per share compared with $709.1 million or $2.21 per share. Excluding one-time items, earnings for 2015 were $2.43 per share, which beat the Zacks Consensus Estimate of $2.38.

Revenues

The company reported revenues of $1,430.5 million in the quarter, relatively flat year over year, and ahead of the Zacks Consensus Estimate of $1,353 million. In local currencies, revenues increased 3% driven by strength in the automotive and industrial markets, partially offset by declines in the information technology, mobile networks and data communications market. Local currency sales were also driven by healthy organic and inorganic growth. For 2015, the company recorded revenues of $5,568.7 million compared with $5,345.5 million in 2014.

Operating margin for the quarter improved to 20.2% from 19.6% in the year-ago quarter. The increase in operating margin was primarily due to a focused execution of operational plans and stringent cost-cutting measures.

Segment Performance

Segment wise, Cable business sales represented 5.7% of total sales in the quarter and were down 3.7% year over year. Sales from the Interconnect business, which accounted for 94.3% of total sales, were almost flat year over year at $1,349.6 million.

Operating income from the Interconnect business improved marginally to $301.9 million during the quarter from $301.2 million in the year-ago quarter. Operating income from the Cable business was also flat at $10.1 million.

Acquisition

Subsequent to the end of the quarter, Amphenol completed the acquisition of FCI Asia Pte Ltd from the affiliates of alternative investment firm Bain Capital for $1.275 billion. The acquisition is expected to be accretive to Amphenol's earnings in 2016, excluding acquisition-related costs. The transaction is also expected to result in synergistic benefits with Amphenol's strong operating discipline and FCI's advanced technological support and experienced management team.

Headquartered in Singapore, FCI manufactures interconnect solutions for the telecom, datacom, wireless communications and industrial markets. The acquisition is a strategic fit for Amphenol with FCI's proven expertise in the development of high-speed, input-output, power and miniaturized interconnect products. This complimentary product portfolio further enriches the service offerings of Amphenol and enables it to better serve its customers in a broad array of end 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 reward shareholders with risk-adjusted returns. During the quarter, Amphenol repurchased approximately 1 million shares pursuant to its stock repurchase program, bringing its tally for 2015 to over 4.5 million shares.

Cash and cash equivalents stood at $1,737.2 million as of Dec 31, 2015 compared with $968.9 million in the year-ago period, while long-term debt (excluding current portion) aggregated $2,813.2 million and $2,654.6 million, respectively.

Cash flow from operations for 2015 aggregated $1,030.5 million, including a record $322 million for the reported quarter versus $880.9 million in 2014.

Outlook

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.

Amphenol expects first-quarter 2015 sales in the range of $1.380 billion to $1.420 billion, representing a year-over-year increase of 4% to 7% in US dollars. Adjusted EPS is expected to be in the range of 55 cents to 57 cents. For full year 2016, the company expects sales in the range of $6.040 billion to $6.200 billion, representing a year-over-year increase of 8% to 11%. The company expects adjusted EPS for 2016 in the range of $2.54 to $2.62, an increase of 5% to 8% year over year, including accretive effect from the FCI acquisition.

Amphenol currently has a Zacks Rank #3 (Hold). Some better-ranked stocks that look promising and are worth a look now include The Interpublic Group of Companies, Inc. IPG , TubeMogul, Inc. TUBE and YuMe, Inc. YUME , each carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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