Amphenol Corporation (APH) reported earnings per share (EPS) of 74 cents in the second quarter of 2010, including a benefit of $10 million or 6 cents per share relating to a reduction in tax expense for tax reserve adjustments, primarily related to the completion of the audits of certain prior-year tax returns.
Excluding these items, EPS was 68 cents, beating the Zacks Consensus Estimate of 61 cents, as well as the year-ago result of 43 cents.
Sales came in at $885 million, up 29.1% from the year-earlier quarter and up 14.8% sequentially. Currency translation effect negatively impacted sales by approximately 0.4% or $3 million in the second quarter of 2010, compared to the year-earlier quarter.
Based in Connecticut, Amphenol designs, manufactures and markets electronic and fiber optic connectors, cable and interconnect systems.
The growth in sales in the reported quarter was driven by strengthening demand in a diverse range of end-markets, which include Information Technology and Data Communications Equipment, Automotive, Industrial and Wireless Devices. Product wise, Interconect products generated sales of $817.1 million, up 31.5% year over year. Cable products generated sales of $67.6 million, up 6.1% year over year.
Gross margin improved to 32.7% from 31.2% in the year-earlier quarter and 32.3% in the previous quarter. Operating margin improved to 19.8% in the quarter from 16.8% in the year-ago quarter and 18.8% in the previous quarter.
Amphenol ended the quarter with cash and equivalents of $436.7 million, up from $431.7 million at the end of the previous quarter. As of June 30, 2010, total debt was $781.9 million, down from $801.9 million at the end of the year-earlier quarter.
In early July, Apmphenol acquired Borisch Manufacturing, a leading U.S. manufacturer of value-add interconnect and electro-mechanical systems for the military/aerospace market. Borisch generated sales of approximately $100 million in the last twelve months. The acquisition will further bolster Amphenol’s position in the military/aerospace market.
Going forward, although Amphenol is encouraged by improvement in overall economic conditions, demand is still not very strong and certain. Assuming improving economic conditions and a normal summer in North America and Europe, Amphenol projects sales between $880 million and $895 million in the third quarter. EPS is forecasted between 67 cents and 69 cents.
Management remains encouraged by the strong orders which lead to a book-to-bill ratio of 1.03. Given signs of recovery and revival of demand in most of the end-markets of Amphenol, we reiterate our Outperform rating on the stock.
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