Amphenol Beats Zacks Estimate - Analyst Blog

Amphenol Corporation (APH) posted net income of $131.1 million or 74 cents per share in the fourth quarter of fiscal 2010 compared with a net income of $87.6 million or 50 cents per share in the year-earlier quarter, beating the Zacks Consensus Estimate of 73 cents.

Based in Connecticut, Amphenol designs, manufactures and markets electronic and fiber optic connectors, cable and interconnect systems.

Sales came in at $949.9 million, up 25% from the year-earlier quarter and surpassed the Zacks Consensus Estimate of $948 million. The results beat management's guidance range of $933 million-$948 million. The unfavorable movement in foreign currency exchange rates negatively affected sales by $4.2 million in the fourth quarter of 2010 compared with the year-earlier quarter.

The growth in sales in the reported quarter was attributed to strengthening demand in markets, which includes Industrial, Mobile Devices and Military Aerospace.

Product wise, Interconnect products generated sales of $891 million, up 28.2% year over year. Cable products generated sales of $58.9 million, down 6.8% year over year.

Management stated that Amphenol continues to fuel its growth opportunities with the help of  diversification combined with a focus on developing enabling technologies for customers both organically and through acquisitions.

Gross margin improved to 32.6%, slightly up from 31.8% in the year-earlier quarter. Operating margin improved to 20.1% in the quarter from 18.3% in the year-earlier quarter.

Amphenol ended the quarter with cash and cash equivalents of $525.9 million, up from $480.5 million at the end of the previous quarter. As of December 31, 2010, total debt was $799.6 million, up from $904 million at the end of the previous quarter.

Fiscal 2010 Highlights

Net revenues for fiscal 2010 came in at $3,554.1 million, up 26% year over year.  Gross margin improved to 32.6% in fiscal 2010 from 31.4% in fiscal 2009. Operating margins inched up to 19.7%, from 17.3% in fiscal 2009.

EPS came in at $2.82, including a benefit of $0.12 per share relating to a reduction in tax expense for tax reserve adjustments. For 2009, EPS came in at $1.83, which included offsetting adjustments of $0.02, related to a favorable tax adjustment and a one-time charge related to refinancing.

During fiscal 2010, the company generated cash from operating activities of $424.9 million compared with $582.3 million in fiscal 2009.

Guidance

On the basis of the improvement in global demand coupled with stabilization of demand patterns, Amphenol projects sales between $925 million and $940 million for the first quarter of fiscal 2011. Earnings per share are forecasted between $0.70 and $0.72.

For fiscal 2011, management projected revenues between $3,885 million and $3,960 million.  EPS is expected between $3.00 and $3.10.

Going forward, management believes that the development of new electronics in all end-markets will provide Amphenol with the opportunity to expand.

We continue to maintain a Neutral recommendation on Amphenol. However, while we are encouraged by the improvement in overall economic conditions, we currently have a Zacks #4 Rank (short-term Sell rating) on the stock as we believe that demand is still not very strong and certain.