Molex Inc. (MOLX) reported first quarter 2011 earnings per share of 45 cents beating Zacks Consensus Estimates of 44 cents per share. The EPS includes the impact of investigative and legal costs related to unauthorized activities in Japan of $5.5 million ($3.5 million after-tax or $0.02 per share). EPS increased 15.4% sequentially and swung to profit with 600% increase year-over-year.
The strong growth in the quarter was primarily a result of new product launches, expansion of customer base and thereby bringing new opportunities. Management is excited with exceeding pre-recession revenue and order levels and believes the benefits are due to the new cost structure.
The Quarter That Was
Revenue increased 5.9% sequentially and 33.2% year-over-year to $897.7 million. Revenue reached an all time record levels and it also surpassed the Zacks Consensus estimates of $867 million. Revenue also surpassed the high end of the guidance provided on August 3, 2010.
Management thus increased the dividend by 14.8% to $0.175 (according to figures issued by the company release) effective with the cash dividend payment on January 25, 2011 to shareholders of record on December 31, 2010, for each share of common stock.
Gross profit increased 43.7% year-over-year to $275.1 million and gross margin increased 2.2 percentage points compared to same quarter last year to 30.6%.
Operating profit increased 821.1% to $112.5 million compared to a loss of $15.6 million last year same quarter. Operating margin also increased 14.8 percentage points to 12.5% year-over-year.
Orders for the quarter decreased 5% sequentially and increased 20% year-over-year to $868.4 million.
Capital expenditures were $71.2 million or 7.9% of revenue with investments. Effective tax rate for the quarter was 32.2%.
Backlog decreased 6% sequentially to $445 million, and the reported book-to-bill ratio was 0.97.
Looking Forward
Management expects the revenue to be in the range of $850 to $890 million and the EPS in range of 38 cents to 44 cents for the next quarter. Management has assumed an effective tax rate of 30%.
Conclusion
Estimates for the quarter had been stable in the run-up to the earnings release, with 1 analysts increasing estimates in the last 30 days. The full-year estimate for next year has been trending down, marginally, in recent days, with 2 negative and 1 positive revisions in the last thirty days. The current Zacks Consensus Estimate for 2012 of $1.93 is down from $1.94 thirty days ago. The full-year Zacks Consensus Estimate for 2011 also declined to $1.76 from $1.77 thirty days ago.
We currently have Zacks #3 rank for Molex which translates into a Hold rating on short term basis.
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