Amphenol (APH) Q1 Earnings Beat, Shares Down On Soft '19 View

Amphenol (NYSE:APH) reported first-quarter 2019 adjusted earnings of 89 cents per share that beat the Zacks Consensus Estimate by a penny and increased 7.2% from the year-ago quarter.

Net sales increased 4.9% year over year to $1.96 billion, which comfortably surpassed the Zacks Consensus Estimate of $1.94 billion. Unfavorable foreign exchange negatively impacted sales by $47 million.

However, shares were down 6.3% in pre-market trading, apparently due to slashed guidance for 2019. Amphenol expects the mobile devices end-market sales to decline more than its previous outlook.

Quarter Details

The year-over-year increase in revenues were driven by strong organic growth across the company’s end markets, including military, commercial air, IT datacom, industrial and mobile networks.

Interconnect Products and Assemblies (95.1% of net sales) sales increased 5.2% from the year-ago quarter to $1.86 billion. However, Cable Products and Solutions sales were $95.8 million, down 1.1% year over year.

Gross margin contracted almost 50 basis points (bps) on a year-over-year basis to 32.1%.

Selling, general and administrative expenses (SG&A) as percentage of revenues declined 30 bps to 12%.

Consolidated operating margin contracted 10 bps on a year-over-year basis to 20.1%, driven by improved operational efficiency.

Segment wise, Interconnect Products and Assemblies operating margin declined 10 bps to 22%. Cable Products and Solutions operating margin contracted 70 bps to 11%.

Acquisitions

In April 2019, Amphenol bought Huizhou, China-based Aorora Technology. Aorora designs and manufactures fine pitch and input-output connectors for the automotive and IT datacom markets. The company is expected to generate annual sales of roughly $20 million from this technology.

Most recently, Amphenol completed the acquisition of Schaumburg, Illinois-based Charles Industries, which designs and manufactures fiber optic, power and other outdoor interconnect enclosures and related accessories used primarily in the mobile networks and IT datacom markets. Charles Industries is anticipated to contribute annual sales of roughly $120 million.

Balance Sheet and Cash Flow

As of Mar 31, 2019, Amphenol had cash and cash equivalents worth $1.29 billion, higher than $1.02 billion as of Dec 31, 2018.

Cash flow from operations was $344 million compared with $378 million in the previous quarter.

During the quarter, the company repurchased 1.8 million shares for $160 million.

Guidance

For the second quarter of 2019, Amphenol projects sales between $1.980 billion and $2.020 billion. Adjusted earnings are expected between 91 cents and 93 cents per share.

For 2019, Amphenol expects sales between $8.130 billion and $8.250 billion, down from the previous guidance of $8.190-$8.350 billion. The latest guidance range indicates sales to be down 1% to up 1% in 2019.

Moreover, the company now expects adjusted earnings of $3.80-$3.86 per share, down from the previous guidance of $3.88-$3.96. The latest guidance indicates an increase of 1-2% year over year.

Zacks Rank & Stocks to Consider

Currently, Amphenol has a Zacks Rank #3 (Hold).

Alteryx (NYSE:AYX) , Ceridian HCM Holding (NYSE:CDAY) and ANGI Homeservices (NASDAQ:ANGI) are some better-ranked stocks in the broader computer and technology sector. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While Alteryx and Ceridian HCM are set to report quarterly results on May 1, ANGI Homeservices is scheduled to report on May 8.

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