RBC Capital Raises Price Target on Amphenol (APH) to $71; Reiterates Top Pick
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RBC Capital reiterated a Top Pick rating on Amphenol (NYSE: APH), and raised the price target to $71.00 (from $69.00), given potential for higher EPS and FCF going forward. APH is wellpositioned for upside in the event of a corporate tax-rate reduction. Under Mr. Trump’s tax-reform plans, corporate tax could be adjusted to 15%; looking at our CY17E EPS, tax-rate reductions could bolster EPS by ~16% to ~$3.45+.APH could also see an upside in both Industrial and Mil-Aero businesses under a Trump administration.
Analyst Amit Daryanani commented, "Fundamentally, our long APH thesis remains intact given impressive end-market diversity, stable/positive trends in key segments & an under-levered balance sheet that increases probability of larger M&A. Incrementally, we see several tailwinds that could stack up in 2017 given potential policy changes under the Trump administration: 1) corporate tax rate reductions from 26.5% to 15%, would bolster EPS by $0.47 (~16%) and FCF by ~15%, 2) lift in Industrial segment revenues (~17% of revenue) driven by infrastructure investments, 3) potential for increased military spend under a Republican Congress & President, and 4) potential to repatriate offshore cash. Also, APH has plenty of liquidity (~1.3x leverage) and FCF generation ($800M+) to execute on M&A. Finally, we expect mobile devices to ramp materially in CY17 driven by content uptick. Net/Net: We see an upside EPS scenario of >$3.75 EPS that should enable APH to work towards $85+ (our upside scenario)."
Shares of Amphenol closed at $68.49 yesterday.
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