Ticonderoga on Tech Supply Chain: EMS Industry Gets Off to a Tough Start in 2011, Cutting Growth Forecast
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Ticonderoga on Tech Supply Chain: EMS Industry Gets Off to a Tough Start in 2011, Cutting Our Growth Forecast by Brian White
Analyst, Brian White said, "The EMS Industry Gets Off to a Tough Start in 2011. With six of the seven companies in the Ticonderoga EMS Basket having reported 1Q11 results, it is clear the EMS industry struggled during the March quarter. The companies in the Ticonderoga EMS Basket that have reported 1Q11 results include Benchmark Electronics (NYSE: BHE)(Neutral), Celestica (NYSE: CLS)(Buy), Flextronics (Nasdaq: FLEX)(Sell), Jabil Circuit (NYSE: JBL)(NR), Plexus (Nasdaq: PLXS)(Neutral) and Sanmina-SCI (Nasdaq: SANM)(NR), while Nam Tai Electronics (NYSE: NTE)(Neutral) will report on 5/9."
"Sales Fall 8% Q/Q in 1Q11 and Miss Our Down 5% Estimate. Aggregate sales fell by over 8% sequentially in 1Q11, weaker than our down 5% estimate. Looking into the June quarter, we are modeling a 7.6% sequential sales uptick, slightly ahead of our previous growth rate of over 7.2%. The biggest Q/Q sales declines and misses were reported by Benchmark (down 14%), Flextronics (down 12%) and Sanmina-SCI (down 6%)."
Other highlighted points include: 1) Reducing Our EMS 2011 Sales Growth Forecast; 2) Lowering Our Operating Profit and Margin Estimates; and 3) Inventory to Revenue Ratio Rises to the Highest Level Since 1Q07.
"EMS Industry to Face More Challenges; CLS Our Only EMS BUY. 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, weaker demand trends, lower margin expansion and the risk of approaching peak profit levels. However, we still favor Celestica, as we believe it is poised to deliver the fastest sales growth rate since 2004 on new program wins and is the only EMS company with a sales cycle that is accelerating. We also believe the stock represents the best EMS value (i.e., 7.4x our CY11 pro forma EPS estimate, ex-net cash)."
Analyst, Brian White said, "The EMS Industry Gets Off to a Tough Start in 2011. With six of the seven companies in the Ticonderoga EMS Basket having reported 1Q11 results, it is clear the EMS industry struggled during the March quarter. The companies in the Ticonderoga EMS Basket that have reported 1Q11 results include Benchmark Electronics (NYSE: BHE)(Neutral), Celestica (NYSE: CLS)(Buy), Flextronics (Nasdaq: FLEX)(Sell), Jabil Circuit (NYSE: JBL)(NR), Plexus (Nasdaq: PLXS)(Neutral) and Sanmina-SCI (Nasdaq: SANM)(NR), while Nam Tai Electronics (NYSE: NTE)(Neutral) will report on 5/9."
"Sales Fall 8% Q/Q in 1Q11 and Miss Our Down 5% Estimate. Aggregate sales fell by over 8% sequentially in 1Q11, weaker than our down 5% estimate. Looking into the June quarter, we are modeling a 7.6% sequential sales uptick, slightly ahead of our previous growth rate of over 7.2%. The biggest Q/Q sales declines and misses were reported by Benchmark (down 14%), Flextronics (down 12%) and Sanmina-SCI (down 6%)."
Other highlighted points include: 1) Reducing Our EMS 2011 Sales Growth Forecast; 2) Lowering Our Operating Profit and Margin Estimates; and 3) Inventory to Revenue Ratio Rises to the Highest Level Since 1Q07.
"EMS Industry to Face More Challenges; CLS Our Only EMS BUY. 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, weaker demand trends, lower margin expansion and the risk of approaching peak profit levels. However, we still favor Celestica, as we believe it is poised to deliver the fastest sales growth rate since 2004 on new program wins and is the only EMS company with a sales cycle that is accelerating. We also believe the stock represents the best EMS value (i.e., 7.4x our CY11 pro forma EPS estimate, ex-net cash)."
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