Ticonderoga Tech Supply Chain: April Sales for the PCB Barometer Fall 6% M/M and Miss Averages
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Rating Summary:
18 Buy, 8 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Ticonderoga Tech Supply Chain: April Sales for the PCB Barometer Fall 6% M/M and Miss Averages by Brian White
Analyst White said, "April PCB Barometer Sales Fall 6% M/M and Miss Averages: This morning, the final April revenue results for the PCB Barometer were reported, with unconsolidated aggregate sales falling 5.7% M/M to NT$12.2 billion. This performance is weaker than the six-year average March decline of 3.0%. The PCB Barometer includes nine leading Taiwan-based PCB fabrication companies as part of our ongoing effort to augment our tech supply chain field checks. These nine PCB companies operated at an annual revenue run rate of US$5.1 billion in April."
Sales Cycle Continues to Decelerate and Barely Stays Positive in April...Not Just Slowing Growth but Rising Material Costs to Squeeze Margins. Within our coverage universe, Flextronics (Nasdaq: FLEX)(Sell) has the highest exposure to the PCB fabrication market, running one of the leading franchises in the business through Multek. As we indicated during our China Tech trip in April, the PCB industry will not only struggle with slowing sales growth this year, but we believe rising material costs will also be a headwind for margins in 2011."
"The EMS World Faces Headwinds but CLS Poised to Outperform. Within our EMS coverage universe, we remain selective given the headwinds facing the EMS industry, which includes a decelerating sales cycle, a lower margin expansion opportunity, slowing end-market growth and the risk of approaching peak profit levels. As part of this environment, we believe Flextronics's big sales miss in the March quarter and weaker than expected June quarter outlook further supports our thesis. In the EMS world, we still favor Celestica (NYSE: CLS)(Buy), as we believe the stock represents the best EMS value (i.e., 7x 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 White said, "April PCB Barometer Sales Fall 6% M/M and Miss Averages: This morning, the final April revenue results for the PCB Barometer were reported, with unconsolidated aggregate sales falling 5.7% M/M to NT$12.2 billion. This performance is weaker than the six-year average March decline of 3.0%. The PCB Barometer includes nine leading Taiwan-based PCB fabrication companies as part of our ongoing effort to augment our tech supply chain field checks. These nine PCB companies operated at an annual revenue run rate of US$5.1 billion in April."
Sales Cycle Continues to Decelerate and Barely Stays Positive in April...Not Just Slowing Growth but Rising Material Costs to Squeeze Margins. Within our coverage universe, Flextronics (Nasdaq: FLEX)(Sell) has the highest exposure to the PCB fabrication market, running one of the leading franchises in the business through Multek. As we indicated during our China Tech trip in April, the PCB industry will not only struggle with slowing sales growth this year, but we believe rising material costs will also be a headwind for margins in 2011."
"The EMS World Faces Headwinds but CLS Poised to Outperform. Within our EMS coverage universe, we remain selective given the headwinds facing the EMS industry, which includes a decelerating sales cycle, a lower margin expansion opportunity, slowing end-market growth and the risk of approaching peak profit levels. As part of this environment, we believe Flextronics's big sales miss in the March quarter and weaker than expected June quarter outlook further supports our thesis. In the EMS world, we still favor Celestica (NYSE: CLS)(Buy), as we believe the stock represents the best EMS value (i.e., 7x 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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