Roger Corporation ROG announced that it has purchased certain dielectric and lamination manufacturing assets located in Chandler, AZ from ISOLA USA Corp.
The purchased assets, which include real estate, buildings and specified equipment, will be used to support capacity expansion of its Advanced Connectivity Solutions (ACS) business.
Management notes that the purchase is in line with growing demand in Advanced Connectivity and Advanced Mobility markets.
The company intends to begin commercial production at the site by 2019 in order to cater to the rising demand for its 5G and Advanced Driver Assistance Systems (ADAS) customers.
ACS Looks Promising
Roger has been undertaking several capacity expansion projects in the United States, China and Europe to cash in on the robust opportunity pipeline of ACS.
In the last reported quarter, ACS generated net sales of $76.4 million, which increased 2.7% year over year. This was driven by higher revenues from aerospace and defense and ADAS.
However, lower demand in portable electronics and wireless 4G LTE applications was a dampener. The transition in the market from 4G to 5G is impacting demand for 4G LTE power amplifier applications.
For the rest of the year, the company is expecting increasing demand for antenna applications for 4.5G and 5G wireless infrastructure applications. Moreover, strength in ADAS and improvement in 4G base stations along with NB-IoT deployments and lifting of the trade ban on ZTE make management optimistic.
However, the expansion plans are having a negative impact on margins in the short term. Higher commodity cost, freight cost and cost associated with maintaining infrastructure to support 5G and ADAS are overhangs. In the last reported quarter, ACS adjusted operating income of $12 million was down $2.3 million from the year-ago quarter.
Nonetheless, management expects the investments to position Rogers well to reap full benefits of substantial growth in these areas.
Notably, the company is looking at synergistic acquisition opportunities to enhance its existing capabilities and expand product portfolio.
Zacks Rank & Stocks to Consider
Roger currently has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader Computer and Technology sector are Microsoft MSFT, Qualys, Inc. QLYS and Fortinet, Inc. FTNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Microsoft, Qualys and Fortinet is projected to be 12.3%, 8% and 16.8%, respectively.
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