Needham & Company on Electronic Manufacturing Services: 2012 Off to a Stable Start
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Price: $19.92 --0%
Rating Summary:
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Today's Overall Ratings:
Up: 9 | Down: 14 | New: 19
Rating Summary:
7 Buy, 2 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 9 | Down: 14 | New: 19
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Needham & Company on Electronic Manufacturing Services: EMS Update: 2012 Off to a Stable Start - Brief Thoughts on Conditions and Multiples
Analyst, Sean K.F. Hannan, said, "The EMS industry is currently working through mixed demand conditions with the most recent pullback likely behind it, while optimism for a better 2H in 2012 appears to be increasing. At present, the only indicators we see that support improvements in the underlying markets are encouraging 12-month forecasts from customers and general order stability. However, the near-term test will be demand pull during the all-important month of March (though too early to tell now, we think it will be acceptable). Outsourcing activity has remained at particularly elevated levels, which should at least provide growth to many in EMS in an otherwise lackluster year. From a
stock perspective, the space has also seen strong performance, with multiples expanding while pessimism has waned. We remain positive on all our names as we look forward, while our top pick in the space remains Jabil Circuit (NYSE: JBL)."
"We maintain our existing price target multiples/ valuation methods for Flextronics (Nasdaq: FLEX), Benchmark Electronics (NYSE: BHE) and Plexus (Nasdaq: PLXS) (all Buy rated), but we are adjusting targets for Sanmina-SCI (Nasdaq: SANM) (Buy) and JBL (see our individual SANM and JBL notes, also published this morning). Most of our valuation multiples are related to each company’s growth profile, and we assign better multiples to those companies with higher-quality mix, margins and recent execution strength. As a result of our closer look, we’ve adjusted our price targets for both SANM (from $12 to $14) and JBL (from $26 to $29). We’ve also reduced our rating on JBL from Strong Buy to Buy, though we note that this rating change has less to do with the company’s execution and more to do with the narrowed valuation gap. Still, considering current valuations across the space, JBL remains our top pick at present."
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Analyst, Sean K.F. Hannan, said, "The EMS industry is currently working through mixed demand conditions with the most recent pullback likely behind it, while optimism for a better 2H in 2012 appears to be increasing. At present, the only indicators we see that support improvements in the underlying markets are encouraging 12-month forecasts from customers and general order stability. However, the near-term test will be demand pull during the all-important month of March (though too early to tell now, we think it will be acceptable). Outsourcing activity has remained at particularly elevated levels, which should at least provide growth to many in EMS in an otherwise lackluster year. From a
stock perspective, the space has also seen strong performance, with multiples expanding while pessimism has waned. We remain positive on all our names as we look forward, while our top pick in the space remains Jabil Circuit (NYSE: JBL)."
"We maintain our existing price target multiples/ valuation methods for Flextronics (Nasdaq: FLEX), Benchmark Electronics (NYSE: BHE) and Plexus (Nasdaq: PLXS) (all Buy rated), but we are adjusting targets for Sanmina-SCI (Nasdaq: SANM) (Buy) and JBL (see our individual SANM and JBL notes, also published this morning). Most of our valuation multiples are related to each company’s growth profile, and we assign better multiples to those companies with higher-quality mix, margins and recent execution strength. As a result of our closer look, we’ve adjusted our price targets for both SANM (from $12 to $14) and JBL (from $26 to $29). We’ve also reduced our rating on JBL from Strong Buy to Buy, though we note that this rating change has less to do with the company’s execution and more to do with the narrowed valuation gap. Still, considering current valuations across the space, JBL remains our top pick at present."
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