Amphenol (APH) Q4 Earnings Beat, Strong End Markets Aid Sales

Amphenol (NYSE:APH) reported fourth-quarter 2018 adjusted earnings of $1.05 per share that beat the Zacks Consensus Estimate by seven cents and increased 22.1% from the year-ago quarter.

Net sales increased 14.4% year over year to $2.22 billion, which comfortably surpassed the Zacks Consensus Estimate of $2.09 billion. Unfavorable foreign exchange negatively impacted sales by $28 million.

Management stated that revenues beat guidance due to incremental sales of products into the mobile devices market.

Moreover, Amphenol recently completed the previously announced acquisition of SSI Controls Technologies. SSI is a leading designer and manufacturer of sensors and sensing solutions for the global automotive and industrial markets, with annual sales of approximately $180 million.

Quarter Details

Revenues were driven by strong organic growth across most of Amphenol’s end markets, including mobile devices, military, IT and data communications, mobile networks, commercial air, and broadband.

Interconnect Products and Assemblies (95.4% of net sales) sales increased 14.6% from the year-ago quarter to $2.12 billion. Moreover, Cable Products and Solutions sales were $102.3 million, up 12% year over year.

Consolidated operating margin remained flat on a year-over-year basis at 20.6%, driven by improved operational efficiency.

Segment wise, Interconnect Products and Assemblies operating margin increased 40 basis points (bps) to 22.8%. Moreover, Cable Products and Solutions operating margin expanded 80 bps to 11.9%.

Balance Sheet and Cash Flow

As of Dec 31, 2018, Amphenol had cash and cash equivalents worth $1.29 billion, higher than $1.02 billion as of Sep 30, 2018.

Cash flow from operations was $378 million compared with $339 million in the previous quarter.

During the quarter, the company repurchased approximately 3 million shares.

Guidance

For the first quarter of 2019, Amphenol projects sales between $1.898 billion and $1.938 billion. Adjusted earnings are expected between 86 cents and 88 cents per share.

Management expects first quarter sales to be negatively impacted by global economic uncertainties related to trade policy and weakness in the mobile devices end market.

For 2019, Amphenol expects sales of $8.190-$8.350 billion, indicating flat to 2% increase on a year-over-year basis.

Moreover, the company expects adjusted earnings of $3.88-$3.96 per share, an increase of 3-5% year over year.

Zacks Rank & Stocks to Consider

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

STMicroelectronics N.V. (NYSE:STM) , Marvell Technology Group (NASDAQ:MRVL) and Pure Storage (NYSE:PSTG) are better-ranked stocks in the broader computer and technology sector. All three sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While STMicroelectronics is set to report on Jan 24, Pure Storage and Marvell are expected to report on Mar 7 and 14, respectively.

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