Amphenol Comfortably Beats Q2 Earnings, Revenues Best Ever

Amphenol Corporation (APH) reported stellar second-quarter 2014 results with record earnings and revenues on the back of solid organic and inorganic growth. Net income for the reported quarter was $174.9 million or $1.09 per share compared with $154.0 million or 95 cents a share in the year-ago quarter. The reported earnings surpassed the Zacks Consensus Estimate by 4 cents.

Impressive growth in the quarter was primarily attributable to Amphenol’s technology leadership and market and geographic diversification. It further reflected the company’s balanced organic and inorganic growth model. This was achieved on the back of a lean and flexible cost structure and an agile and entrepreneurial management team.

Revenues

Quarterly revenues were record high at $1,314.2 million in second quarter 2014, up 16% year over year. The year-over-year growth was led by strength across diversified markets served by the company, which include automotive, commercial air, industrial, mobile networks and IT and datacom markets. Revenues also improved 5% sequentially supported by growth in all the markets of the company. In addition, accretive acquisitions contributed significantly to the top-line growth.

Operating margin improved 70 basis points on a sequential basis to 19.5%. The increase in operating margin was primarily due to focused operational execution and stringent cost-cutting measures.

Segment Performance

Segment wise, Cable business sales represented 7% of total sales in second quarter 2014 and were up 1.7% year over year to $91.8 million. Sales from the Interconnect business, which accounted for 93% of total sales, were up 16.9% year over year to $1,222.3 million driven by accretive acquisitions.

Balance Sheet & Cash Flow

During the quarter, Amphenol purchased approximately 1.4 million shares pursuant to its 10 million shares repurchase program which expires in Jan 2015. Cash and cash equivalents stood at $1,080.1 million at quarter end compared with $886.8 million as of Dec 31, 2013. Long-term debt aggregated $1,542.9 million at Jun 30, 2014 compared with $1,431.4 million at year-end 2013.

Cash flow from operations for the first half of 2014 aggregated $383.3 million versus $360.8 million in the year-ago period. Amphenol increased its quarterly dividend by 25% during the quarter to 25 cents per share to reward its shareholders with prudent risk-adjusted returns.

Outlook

Despite the uncertainties prevailing in the global economy, Amphenol is bullish about its revenue and earnings expectations. The ongoing revolution in electronics enables the company to capitalize on these opportunities and strengthen its position in the market.

Amphenol projects sales between $1.320 billion and $1.350 billion in third-quarter 2014 and earnings per share between $1.12 and $1.15. For full year 2014, management increased its revenue guidance from $5.110 billion and $5.200 billion to $5.210 billion and $5.270 billion, representing a year-over-year rise of 13%-14%. Recurring earnings per share for 2014 is pegged in a band of $4.35 to $4.41, up from earlier projections of $4.25 to $4.34, representing a year-over-year increase of 13%-15%.

Amphenol currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth a look in the industry include TE Connectivity Ltd. (TEL), Littelfuse Inc. (LFUS) and Maxwell Technologies, Inc. (MXWL). All these stocks carry a comparable Zacks Rank #2 (Buy).