Ticonderoga on Tech Supply Chain: March PCB Book-to-Bill Flatlines and Still Below Parity
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Rating Summary:
18 Buy, 8 Hold, 0 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Ticonderoga on Tech Supply Chain: March PCB Book-to-Bill Flatlines and Still Below Parity by Brian White
Analyst, Brian White, said, "Book-to-Bill Flatlines in March and Still at Lowest Level Since 3/2009 - This morning, IPC released its three-month average North American book-to-bill ratio for March, which remained flat at 0.95x versus February. Keep in mind, this ratio remains at the lowest level since March 2009 and well below the average book-to-bill of 1.03x for the month of March dating back to 1990. That said, our stance remains that the PCB book-to-bill ratio is in a bottoming phase, and we do not expect a meaningful downtick from current levels; however, we also do not expect a meaningful rebound as in past recoveries."
"Combined Ratio Still Below Parity and Seasonality - The combined March book-to-bill ratio remained flat M/M and slightly better than the average decrease of just under 1% for March since 1990. Historically, the combined March book-to-bill ratio has averaged 1.03x (dating back to 1990), well above the March print of 0.95x. Within our EMS coverage, Flextronics (Nasdaq: FLEX)(Sell-Rated) has the most exposure to the PCB market, while TTM Technologies (Nasdaq: TTMI)(Not-Rated) and Viasystems (Nasdaq: VIAS)(NR) are leading independent North American-based PCB fabricators."
Other points include: 1) Rigid PCB Book-to-Bill Also Remained Flat in March and Below Parity; 2) After a Big Uptick in February, Flexible Book-to-Bill Slips in March.
"We Expect More Challenges in the EMS World but CLS to Outperform - We have been highlighting in recent months why we believe the easy money in the EMS stocks has already been made and now the group must fight a decelerating sales cycle, lower margin expansion and the risk of approaching peak profit levels. Historical data shows that the EMS stocks have mirrored the peaks and troughs in the sales cycle. As such, fighting a decelerating sales cycle has not been a profitable endeavor and we believe Flextronics' big disappointment last night further supports our thesis. In the EMS world, we still favor Celestica (NYSE: CLS), as we believe the stock represents the best EMS value (i.e., 7.6x our CY11 pro forma EPS estimate, ex-net cash), while also benefiting from new program ramps that we believe will allow the company to deliver the fastest sales growth since 2004."
Analyst, Brian White, said, "Book-to-Bill Flatlines in March and Still at Lowest Level Since 3/2009 - This morning, IPC released its three-month average North American book-to-bill ratio for March, which remained flat at 0.95x versus February. Keep in mind, this ratio remains at the lowest level since March 2009 and well below the average book-to-bill of 1.03x for the month of March dating back to 1990. That said, our stance remains that the PCB book-to-bill ratio is in a bottoming phase, and we do not expect a meaningful downtick from current levels; however, we also do not expect a meaningful rebound as in past recoveries."
"Combined Ratio Still Below Parity and Seasonality - The combined March book-to-bill ratio remained flat M/M and slightly better than the average decrease of just under 1% for March since 1990. Historically, the combined March book-to-bill ratio has averaged 1.03x (dating back to 1990), well above the March print of 0.95x. Within our EMS coverage, Flextronics (Nasdaq: FLEX)(Sell-Rated) has the most exposure to the PCB market, while TTM Technologies (Nasdaq: TTMI)(Not-Rated) and Viasystems (Nasdaq: VIAS)(NR) are leading independent North American-based PCB fabricators."
Other points include: 1) Rigid PCB Book-to-Bill Also Remained Flat in March and Below Parity; 2) After a Big Uptick in February, Flexible Book-to-Bill Slips in March.
"We Expect More Challenges in the EMS World but CLS to Outperform - We have been highlighting in recent months why we believe the easy money in the EMS stocks has already been made and now the group must fight a decelerating sales cycle, lower margin expansion and the risk of approaching peak profit levels. Historical data shows that the EMS stocks have mirrored the peaks and troughs in the sales cycle. As such, fighting a decelerating sales cycle has not been a profitable endeavor and we believe Flextronics' big disappointment last night further supports our thesis. In the EMS world, we still favor Celestica (NYSE: CLS), as we believe the stock represents the best EMS value (i.e., 7.6x our CY11 pro forma EPS estimate, ex-net cash), while also benefiting from new program ramps that we believe will allow the company to deliver the fastest sales growth since 2004."
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