On Sep 13, Zacks Investment Research upgraded diversified electronics manufacturer Amphenol Corporation (APH) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #2 (Buy) largely on the back of an accretive acquisition and strong long-term fundamentals.
Amphenol’s share price has been on an uptrend since Feb 2014, barring one or two occasions. The stock hit a 52-week high of $104.97 on Sep 3 and is currently trading at $104.22 for a healthy one-year return of 33.5%. Despite its price appreciation, Amphenol still has the wherewithal for the stock to climb up. Investors also remain upbeat as the company reported record earnings and revenues in the last reported quarter on the back of solid organic and inorganic growth.
Growth Drivers
Amphenol recently inked a definitive agreement to acquire the Casco Automotive Group for about $450 million in order to augment its presence in the automotive market. Headquartered in Bridgeport, CT, with facilities in the Americas, Europe and Asia, Casco Automotive is one of the leading suppliers of highly engineered data connectivity, power, charging and sensor products in the automotive market. The company has over 70 years of experience in sensor and module development. These sensors help to monitor events around them, transmit information and contribute to the automatic control of various vehicle functions for greater driving pleasure and safety.
Amphenol is likely to leverage on Casco Automotive’s complementary product offerings to strengthen its position in the automotive market that is likely to witness healthy growth with a broad proliferation of electronic applications. The acquisition is expected to be accretive from the very first year of its operation.
A few days back, Amphenol also disclosed its plans to bring about a two-for-one stock split in October this year. The split stock will be paid in the form of stock dividend and each shareholder at the close of business hours on Oct 2, 2014 will receive an additional share on the record date.
The strategic move is expected to increase the liquidity of the stock and lead to more trading as the number of outstanding shares is doubled and share price halved. This in turn might further drive up share prices as more small investors buy the stock and boost demand.
Estimate Revisions
The solid fundamentals are validated by the positive earnings estimate revisions, driving the Zacks Consensus Estimate higher both for the ongoing quarter as well as for the year. The Zacks Consensus Estimates for the ongoing quarter and year are currently pegged at $1.14 and $4.40, respectively, representing 16.7% and 14.4% year-over-year growth.
Other Stocks to Consider
Other stocks in the industry that are worth mentioning include InvenSense, Inc. (INVN), ZAGG Inc (ZAGG) and Universal Display Corp. (OLED). All these stocks carry a Zacks Rank #2 (Buy).
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