Amphenol Tops, Ups Forecast (APH)

Amphenol Corporation (APH) posted a net income of $0.86 per share in the second quarter of 2012, beating the Zacks Consensus Estimate by 2 cents. The quarter's results reported an increase from the prior quarter of $0.77 per share and the year-ago figure of $0.85 per share.

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

Sales came in at a record $1.061 billion, up 4.2% year over year and 8.0% sequentially, and beat management’s guidance range of $1.040 billion to $1.055 billion. The unfavorable movement in foreign currency exchange rates negatively impacted sales by approximately $19 million in the second quarter of 2011, compared with the year-earlier quarter.

The company serves a variety of end-markets and the diversification in end markets enables the company to post strong results even in an uncertain economic environment.

On a year-over-year basis, Amphenol stated that the strength in industrial, commercial aerospace and telecommunications and data communications equipment markets more than offset the decline in the defense and wireless markets.

Product-wise, Interconnect products generated sales of $985.5 million, up 4.4% year over year. Cable products generated sales of $75.6 million, up 2.2% year over year.

Gross margin came in at 31.5%, up from 31.0% in the previous quarter, but marginally down from 31.6% in the year-ago quarter. Operating margin improved to 19.4% from 18.9% in the previous quarter, but declined from 21.1% in the year-ago quarter.

During the quarter, Amphenol purchased 2.1 million shares. Amphenol ended the quarter with cash and cash equivalents of $646.0 million, up from $620.9 million at the end of the previous quarter. Debt at the end of the quarter increased to $1,454.5 million, up from $1,316.8 million at the end of the previous quarter. Earlier, Amphenol increased the quarterly dividend to $0.105 per share.

Guidance

Assuming stable economic conditions and current currency exchange rates including a relatively weaker euro, Amphenol projects sales between $1.080 billion and $1.100 billion in the second quarter of 2012. Earnings per share (excluding one-time items) are forecasted between $0.87 and $0.90.

For 2012, management now projects revenues between $4.210 billion and $4.250 billion, up from its earlier estimate of revenues between $4.105 billion and $4.190 billion and up 7% – 8% from 2011. Earnings per share are expected between $3.38 and $3.44, an increase from the previous estimate of $3.30 and $3.38 and up 11% – 13% from 2011.

We maintain a Neutral recommendation on the stock. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.