Amphenol is displaying a strong mix of relative share-price strength along with sales and profit acceleration. Electronic components maker Amphenol is today's IBD Stock of the Day.
The stock rallied more than 8% April 23, after Amphenol sailed past expectations for the first quarter. Earnings jumped 58%, revving up from gains of 22%, 28% and 34% in earlier quarters. Q1 sales rose 48%, following quarterly gains of 18%, 26% and 30%.
CEO R. Adam Norwitt cited organic growth in the datacom market, mobile devices, defense and communications networks. The company's acquisitions also aided performance.
While many companies are withdrawing guidance, Amphenol forecasts current-quarter sales of $4.9 billion to $5 billion, for an increase of 36% to 39% year over year. It estimated adjusted earnings of 64 to 66 cents a share, or 45% to 50% above the year-ago period. Those estimates topped analyst expectations, too.
The forecast assumes no major shifts in currency rates and the economic outlook, however. Asked about tariff risks in the earnings call with analysts, Norwitt described the problem as manageable.
"We have more than 300 facilities in more than 40 countries. And our general principle is that we support our customers close to where they are in whatever region," he said, according to a transcript via FactSet.
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Company managers are working to mitigate the impacts and work with customers to pass on any higher costs. He added there's a "slight impact on pricing" as the second quarter got underway. "And I think implicit in our guidance is that our margins are still very strong in the second quarter. So, that must not be a tremendous impact."
Analysts at Goldman Sachs, Citigroup, JPMorgan and other firms raised their price targets on Amphenol stock following the earnings report. The consensus EPS estimate for the full year is $2.61, an increase of 38%. Sales are expected to climb 31% to nearly $20 billion, according to FactSet.
Amphenol has a terrific 97 EPS Rating. It also boasts a perfect 99 Composite Rating out of 99.
Amphenol Leads Industry Group
The first-quarter results only confirmed Amphenol stock as the leader of its electronic parts industry group. It owns the highest Composite, EPS and SMR Ratings. The group itself is not doing so well, ranked No. 154 out of 197 groups.
The company is one of the world's largest providers of electrical, electronic and fiber-optic connectors and interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. Its customers include automotive, broadband communications, aerospace, industrial and technology companies.
Much of the 34% sales increase from the fourth quarter was due to sales of products for artificial intelligence applications such as data centers. The company expects that demand to grow further. Despite reports that some companies are slowing data-center spending, Norwitt said Amphenol customers "need as much as we can get them."
Stock In Cup Base
The stock has been forming a cup base since it peaked on Jan. 24 at 79.39. That price level sets the current buy point, although the stock could be forming a handle. That would bring down the buy point to perhaps 76.89.
Shares have shot up as much as 76% since they began a run-up with a breakout to new highs in November 2023. The current base has a decline of 29%, which undercut a previous five-week flat base. That action reset Amphenol's base count, so the stock can be treated as a first-stage pattern, just like at the beginning of its run. Early stage bases have a higher likelihood of succeeding.
The relative strength line is at new highs, which is a bullish sign.
Amphenol stock has a 21-day average true range (ATR) of 3.32%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
There are exceptions, but given current market conditions, IBD generally suggests investors keep most of their portfolio focused on stocks with ATRs at or below 6%.
