Technology

Zacks Industry Outlook Highlights TE Connectivity, nVent Electric, TTM Technologies and CTS

For Immediate Release

Chicago, IL – August 18, 2022 – Today, Zacks Equity Research discusses TE Connectivity TEL, nVent Electric NVT, TTM Technologies TTMI and CTS Corp. CTS.

Industry: Electronics

Link: https://www.zacks.com/commentary/1969164/4-electronics-stocks-to-escape-pandemic-led-disruptions

Supply-chain disruptions and end-market dynamics across the world, owing to the pandemic, have affected the Zacks Electronics - Miscellaneous Components industry. Depressed linear markets, growing geo-political tensions and rising inflationary pressure are weighing on the industry's prospects.

However, TE Connectivity, nVent Electric, TTM Technologies and CTS Corp. are poised to benefit from the solid adoption of AI and the democratization of IoT techniques, which are transforming robotics, industrial automation, transportation systems, retail and healthcare.

Industry Description

The Zacks Electronics - Miscellaneous Components industry primarily comprises companies that provide a wide range of accessories and parts used in electronic products. Their offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions.

The industry participants cater to varied end markets such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems, and consumer electronics. Its customers consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.

4 Trends Shaping the Future of Electronics - Miscellaneous Components Industry

Supply-Chain Disruptions Remain Worrisome: The industry players are reeling under the impacts of the coronavirus-induced macroeconomic woes. Supply chains have been disrupted by lockdown measures, owing to the pandemic, which, in turn, severely impacted the industry participants. Although economies have reopened in several parts of the world, production delays remain a major concern.

The pandemic has aggravated the concerns related to the economic downturn, which continues to wreak havoc on new bookings of the industry players. The emergence of new variants of COVID-19 continues to disrupt the supply chain further, which is concerning.

Labor Shortages - A Concern: The coronavirus outbreak-induced labor shortages are continuously impacting the production capacity of electronic companies. The companies are struggling to meet the rising demand as a result of the reopening of economies, owing to worker absenteeism and short-term shutdowns. The shortage of labor, along with rising inflationary pressure, is dampening the growth prospects of the industry participants by increasing their lead times.

Automation Boom - A Tailwind: The requirement for faster, more powerful and energy-efficient electronics is leading to increased automation. The use of control systems such as computers and robots as well as information technologies for handling different processes and machinery is driving growth in the industry.

The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will continue to benefit the industry participants. IoT-supported factory-automation solutions are other contributing factors. The evolution of smart cars and autonomous vehicles is expected to drive growth of the industry.

Miniaturization Remains a Key Factor: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. The demand for advanced packaging, which enables the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of device architectures like FinFET transistors and 3D-NAND, and the rising utilization of new manufacturing materials to increase transistor and bit density are driving the demand for solutions provided by the industry players.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Electronics – Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #136, which places it in the bottom 46% of more than 250 Zacks industries.

The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this industry's earnings growth potential. Since Feb 28, 2022, the industry's earnings estimates for the current year have moved down 17.7%.

Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. But before we present the top industry picks, it is worth taking a look at the industry's shareholder returns and current valuation first.

Industry Lags S&P 500, Outperforms Sector

The Zacks Electronics - Miscellaneous Components industry has underperformed the S&P 500 composite and outperformed the broader Zacks Computer and Technology sector over the past year.

The industry has lost 15.5% over this period versus the S&P 500 and broader sector's decline of 3.4% and 16.9%, respectively.

Industry's Current Valuation

On the basis of forward 12-month price to earnings, which is a commonly used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 21.05X versus the S&P 500's 18.62X and sector's 23.43X.

Over the past five years, the industry has traded as high as 25.29X, as low as 14.53X and recorded a median of 18.67X.

4 Electronics - Miscellaneous Components Stocks to Buy

TTM Technologies: The Santa Ana, CA-based company is continuously benefiting from its strength in commercial end-markets. Increasing productivity in North America remains a major positive. The company's recent acquisition of Telephonics remains noteworthy. The buyout is likely to strengthen TTMI's presence in the aerospace and defense end market by enhancing its offerings with engineered system-level solutions.

The Zacks Rank #1 (Strong Buy) company manufactures technology solutions like engineered systems, radio frequency (RF) components, RF microwave/microelectronic assemblies and printed circuit boards.

You can see the complete list of today's Zacks #1 Rank stocks here.

TTMI has gained 15.8% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been revised 23.8% upward to $1.61 per share over the past 30 days.

CTS: The Lisle, IL-based company is well-positioned to keep gaining from the solid momentum across premium non-transportation end markets. Disciplined capital allocation and strategic acquisitions bode well. The company's TEWA Temperature Sensors acquisition, which has bolstered its presence in Europe, is anticipated to continue contributing well to its financial performance in the days ahead.

This Zacks Rank #1 company manufactures sensors, actuators and electronic components, and supplies these products to OEMs in the aerospace, communications, defense, industrial, information technology, medical and transportation markets. CTS is expected to continue gaining from its growing traction among new electric vehicle applications.

CTS has gained 20.3% in the past year. The Zacks Consensus Estimate for its 2022 earnings has been unchanged at $2.40 per share over the past 30 days.

TE Connectivity: The Switzerland-based company is well-poised to gain from strong momentum across data centers. The solid demand for data and devices in cloud applications and data centers, courtesy of the increasing work-from-home trend due to the pandemic, is likely to drive growth. Solid content growth, growing automotive and commercial transportation sales, and strength across auto applications remain major positives.

This Zacks Rank #3 (Hold) company manufactures and designs products that connect and protect the flow of power and data inside millions of products used by consumers and industries. TEL is likely to continue gaining from the growing proliferation of autonomous features, and hybrid and electric vehicle technology.

TE Connectivity has lost 8% in the past year. The Zacks Consensus Estimate for TEL's fiscal 2022 earnings has been revised 2% upward to $7.27 per share over the past 30 days.

nVent Electric: The London, U.K.-based company has been gaining from portfolio strength, and modular and digital platforms. The company's growth, profits and cash strategies remain noteworthy. Strengthening relationships with strategic channel partners are expected to continue benefiting the company.

The Zacks Rank #3 company, which is a provider of electrical connection and protection solutions, remains optimistic about the strong demand for its products and solutions. The solid execution of its strategy across high-growth verticals, product introductions, global expansion and strategic acquisitions remain tailwinds.

nVent Electric has gained 12.6% in the past year. The Zacks Consensus Estimate for NVT's 2022 earnings has been revised 1.4% upward to $2.22 per share over the past 30 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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CTS Corporation (CTS): Free Stock Analysis Report
 
TE Connectivity Ltd. (TEL): Free Stock Analysis Report
 
TTM Technologies, Inc. (TTMI): Free Stock Analysis Report
 
nVent Electric PLC (NVT): Free Stock Analysis Report
 
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