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2012 Outlook For EMS Sector Upside (BHE, CLS, FLEX, JBL, SANM, AAPL)

Administrator — Wed, 11 Jan 2012 13:20:37 +0000

Most electronics manufacturing services outfits, EMS companies, have recovered handily from the lowest points in November, but most of these remain significantly off of their highs over the last year. Some may argue that their charts have moved out of their downward trends now. What is interesting is that with the U.S. breaking away from the woes of Europe and with the aftermath of the Thai floods abating somewhat, it is possible that these EMS stocks could offer significant value in 2012 and for long-term investors.

Benchmark Electronics Inc. (NYSE: BHE), Celestica Inc. (NYSE: CLS), Flextronics (NASDAQ: FLEX), Jabil Circuit Inc. (NYSE: JBL), and Sanmina-SCI Corporation (NASDAQ: SANM) all hang in the balance. Unfortunately, the consumer move to Apple Inc. (NASDAQ: AAPL) and Apple’s use of Foxconn is another wildcard (even with its suicide problems) because much of the business goes in that direction. Still, upside remains in some of these names as most of these companies get business from multiple sectors outside of technology manufacturing.

We have looked at the current share price along with recent share performance. Also considered is the fundamental trends behind each, as well as the consensus price target from Thomson Reuters and current and forward price/earnings analysis.

Benchmark Electronics Inc. (NYSE: BHE) trades around $15.00 and the 52-week range is $12.01 to $20.24. With an $870 million market value, this one trades at 17-times expected earnings and 15-times expected 2012 earnings. Thomson Reuters has a mean price target objective of $14.90, indicating implied upside is non-existent.

Celestica Inc. (NYSE: CLS) trades around $8.00 and the 52-week range is $6.79 to $12.48, it is worth about $1.7 billion market value, this one trades at under 8-times expected earnings and slightly further under 8-times expected 2012 earnings. Thomson Reuters has a mean price target objective of $9.88, indicating implied upside of about 23%.

Flextronics (NASDAQ: FLEX) trades around $6.00, its 52-week range is $5.05 to $8.50, and it has a market cap of $4.3 billion, and . With an $870 million market value. Flextronics trades at 7-times expected earnings and about 5.6-times expected 2012 earnings. Thomson Reuters has a mean price target of $8.00, indicating implied upside of about 33%.

Jabil Circuit Inc. (NYSE: JBL) trades around $21.40 and the 52-week range is $13.94 to $23.09, so it is the least punished of the whole EMS lot. Jabil has a market value of about $4.4 billion. Its fiscal year is not until August, so its expected earnings multiple today is about 8.3-times expected earnings. Thomson Reuters has a mean price target of $23.73, indicating implied upside of about 10%.

Sanmina-SCI Corporation (NASDAQ: SANM) has a price of about $9.75 and the market value is just under $800 million. Its 52-week range is $6.01 to $17.32. Its fiscal year ends in September and it trades at a mere 6.7-times expected earnings. Thomson Reuters has a mean price target objective of $10.88, indicating implied upside of about 11%.

The achilles heel for these companies and their valuation is that all are international today and none of the group mentioned offer dividends to reward shareholders during the economic lull.

The good news is that these companies add and contract with the global trends. A slower India and China are not helping, but Japan has been coming back on after last year’s earthquake and tsunami wiped out the Japanese growth story. These companies are also tending to a poor European situation right now. Most earnings estimates for the year have already come down in recent weeks, but the question is whether or not those have come down enough.

JON C. OGG

Filed under: ADR, Business Services, Consumer Electronics, Consumer Goods, Corporate Governance, Economy, International Markets, PC Companies, Semiconductor, Technology Companies Tagged: AAPL, BHE, CLS, FLEX, JBL, SANM

Other EMS Stocks Holding Up Better Than Jabil (JBL, BHE, CLS, FLEX, PLXS, SANM)

247wallst — Wed, 26 Mar 2008 12:13:45 +0000

Jabil Circuit Inc. (NYSE: JBL) is one of the big losers today as sharesa are down and out due to missed earnings and forecasts. This is a new 52-week low. The electonic manufacturing services company posted quarter losses of $24 million last, compared to profits of $13.9 million this quarter last year. The losses were due to restructuring and impairment charges reaching $41 million. EPS were -$0.12 on $3.1 billion in sales, compared to $0.07 EPS a year ago. Without the one-time charges, the company would have had $0.20 EPS. Thomson Financial analysts estimated an average of $0.18 EPS on $3.05 billion in sales, although one-time charges were excluded. The company also stated that third quarter results will undershoot analyst projections.

Downgrades by Deutsche, JPMorgan, and Thomas Weisel have not softened the blow. In mid-day trading, the stock is down by $1.77 per share, over 15%, to $9.61 compared to a high of $25.80. This also has the other electronic manufacturing service players faring not so well today, although it interestingly enough isn’t hurting them nearly as much as Jabil took heat. You will see with notes below:

Benchmark Electronics (NYSE: BHE) is also down today by over 5% to $18.49. The 52-week range is $14.90 to $27.01.
Celestica Inc. (NYSE: CLS) is down almost 6% today to $6.40, although only $1.00 away from its 52-week high of $7.35.
Flextronics International (NASDAQ: FLEX) is down by $0.45, 4%, to $9.71 today, only $0.65 from its 52 week low reached January 23. The 52-week high sits at a far $13.60.
Plexus Corp. (NASDAQ: PLXS) isn’t down by as much compared to the others. The stock is down only 2% today to $27.53, still very far from its 52-week low and high of $16.62 to $32.47, respectively.
Sanmina-SCI Corp. (NASDAQ: SANM) also down by 5% today to $1.71. The 52-week range is $1.15 to $3.88.

What is interesting about these is that Jabil has been by far the worst one of the group by far, although Sanmina-SCI has been in a turnaround that has taken longer than most should be happy with. Many of the others have been down and out as well as an overall spending climate is probably slowing more orders. The good news is that many are diversifying away from being pure technology outsourced manufacturers to more broad-based outsourced manufacturing companies. The bad news is that the slowdown isn’t just limited to tech. If Jabil’s trend is systematic rather than symptomatic, then the others in the group might see more pressure after today.

Jon C. Ogg
March 26, 2008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers

Earlybird Analyst Calls (MAY 15, 2007)

247wallst — Tue, 15 May 2007 06:19:34 +0000

AMGN cut to Neutral at Baird.
AOG cut to Hold at Jefferies.
BEAS cut to Neutral at Credit Suisse.
BHE started as Neutral at Credit Suisse.
CLS started as Underperform at Credit Suisse.
COGO started as Overweight at Lehman.
DCX raised to Buy at UBS.
EPIC started as Buy at UBS.
FLEX started as Outperform Credit Suisse.
GLP cut to Equal Weight at Lehman.
GM raised to Equal Weight at Lehman.
ICFI cut to Hold at Jefferies.
JAH started as Overweight at Lehman.
JBL started as Neutral at Credit Suisse.
MRO raised to Buy at B of A.
PGR started as Reduce at UBS.
PLXS started as Neutral at Credit Suisse.
SANM started as Neutral at Credit Suisse.
SLR started as Underperform at Credit Suisse.
SOFO started as Buy at Cantor Fitzgerald.
STEC cut to Hold at Deutsche Bank; cut to Sector Perform at CIBC.
TIBX cut to Neutral at Credit Suisse.
TSO cut to Neutral at B of A.
VRAZ started as Equal Weight at Lehman.
VLO cut to Neutral at B of A.

Jon C. Ogg
May 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.