Needham & Company 2011 Recap & 2012 Outlook: Industrial Tech Stocks Underperform Broader Market In 2011 Despite Strong Operating Results
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Price: $88.24 +0.22%
Rating Summary:
12 Buy, 9 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Rating Summary:
12 Buy, 9 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Needham & Company 2011 Recap & 2012 Outlook: Industrial Tech Stocks Underperform Broader Market In 2011 Despite Strong Operating Results
Analyst, James Ricchiuti, said, "After two years of robust gains, stocks in our industrial and diversified technology universe underperformed the broader market in 2011 as macro concerns trumped what was another year of stellar revenue and earnings growth for most of our coverage names. Decliners led advancers by a two-to-one margin, even though of the 14 names in our universe registering declines in 2011, nine are on track to post sharply higher revenues and net income for the year. To be sure, the potential for a slowdown in 2012 looms large in the recent performance of our names. Indeed, macro headwinds, including the likelihood of recession in Europe, continued slow growth in the U.S. and increased uncertainty in China, could weigh on our group in 2012. With that in mind, our top picks for 2012 are more defensive in nature. We favor a previous high-flyer, IPG Photonics (Nasdaq: IPGP)(Buy), which is down 36% in the last three months owing to what we regard as a market overreaction to the expected deceleration in growth in 2012 (after we might add the company grew 60% in 2010 and over 60% through the first nine months of 2011). We also like Newport Corp. (Nasdaq: NEWP)(Buy), which recently completed what we believe is a transformative acquisition that has provided a platform for stronger growth in 2012 and greatly reduced the company’s exposure to the highly cyclical semiconductor capital equipment market."
"In our 2011 outlook, we highlighted several names in our industrial technology universe that were well-positioned for 2011. They included Cognex (Nasdaq: CGNX)(Buy), FARO Technologies (Nasdaq: FARO)(Buy), FEI Company (Nasdaq: FEIC)(Buy), FLIR (Nasdaq: FLIR) (Hold), and Orbotech (Nasdaq: ORBK)(Buy). In the case of FARO and FEI, healthy demand, expansion into new markets and new products helped set the stage for strong growth in revenues and earnings in 2011. FARO, a leader in portable 3D measurement tools, has benefited from strong growth in its core FARO Arm metrology product line, while the disruptive Focus 3D scanner has emerged as one of the most exciting new products in the company’s history. In the most recent Q3, FARO provided investors with a glimpse of the strong operating leverage story that we see unfolding over the next year as operating margins reached their highest level in over six years. FEIC, meanwhile, has been consistently meeting or beating quarterly expectations for nearly three years. While FEIC’s growth rate is
expected to slow in 2012, we believe this is well understood by the market. Over the next two years, we expect FEIC to make strides expanding its served available market in the life science and natural resource markets. Shares of FARO and FEIC are up 39% and 59% year to date, respectively. We believe both FARO and FEIC can continue to work higher in 2012, and we reiterate our Buy ratings on both stocks."
"Other Stocks Worth Watching In 2012: 2011 was a wild ride for investors in the 3D printer stocks, Stratasys (Nasdaq: SSYS) (Hold), and 3D Systems (NYSE: DDD)(Buy). Shares of both companies soared early in the year as investors focused on the adoption of 3D printing/rapid prototyping technology in the design and manufacturing markets. The market is being driven by new low-cost printers, improvements in the performance of materials and growing recognition of the benefits that 3D printing technologies afford manufacturers in accelerating time to market and improving product quality and reducing design errors. However, while the industry growth drivers are more favorable than at any time in recent memory, shares of both companies clearly got ahead of the fundamentals. The resulting sharp selloff left SSYS down 45% from its 52-week high and DDD down 49% from its peak earlier this year...We reiterate our Buy rating on DDD."
"Among the micro-cap names in our coverage universe, out top picks are LeCroy (Nasdaq: LCRY)(Buy), which is currently trading at less than 7x our current year EPS estimate, and Sypris Solutions (Nasdaq: SYPR)(Buy), which is trading at 3x EV/estimated 2012 EBITDA. SYPR recently announced a share repurchase, which if fully executed would translate to approximately 7% of the total shares outstanding at current prices."
Analyst, James Ricchiuti, said, "After two years of robust gains, stocks in our industrial and diversified technology universe underperformed the broader market in 2011 as macro concerns trumped what was another year of stellar revenue and earnings growth for most of our coverage names. Decliners led advancers by a two-to-one margin, even though of the 14 names in our universe registering declines in 2011, nine are on track to post sharply higher revenues and net income for the year. To be sure, the potential for a slowdown in 2012 looms large in the recent performance of our names. Indeed, macro headwinds, including the likelihood of recession in Europe, continued slow growth in the U.S. and increased uncertainty in China, could weigh on our group in 2012. With that in mind, our top picks for 2012 are more defensive in nature. We favor a previous high-flyer, IPG Photonics (Nasdaq: IPGP)(Buy), which is down 36% in the last three months owing to what we regard as a market overreaction to the expected deceleration in growth in 2012 (after we might add the company grew 60% in 2010 and over 60% through the first nine months of 2011). We also like Newport Corp. (Nasdaq: NEWP)(Buy), which recently completed what we believe is a transformative acquisition that has provided a platform for stronger growth in 2012 and greatly reduced the company’s exposure to the highly cyclical semiconductor capital equipment market."
"In our 2011 outlook, we highlighted several names in our industrial technology universe that were well-positioned for 2011. They included Cognex (Nasdaq: CGNX)(Buy), FARO Technologies (Nasdaq: FARO)(Buy), FEI Company (Nasdaq: FEIC)(Buy), FLIR (Nasdaq: FLIR) (Hold), and Orbotech (Nasdaq: ORBK)(Buy). In the case of FARO and FEI, healthy demand, expansion into new markets and new products helped set the stage for strong growth in revenues and earnings in 2011. FARO, a leader in portable 3D measurement tools, has benefited from strong growth in its core FARO Arm metrology product line, while the disruptive Focus 3D scanner has emerged as one of the most exciting new products in the company’s history. In the most recent Q3, FARO provided investors with a glimpse of the strong operating leverage story that we see unfolding over the next year as operating margins reached their highest level in over six years. FEIC, meanwhile, has been consistently meeting or beating quarterly expectations for nearly three years. While FEIC’s growth rate is
expected to slow in 2012, we believe this is well understood by the market. Over the next two years, we expect FEIC to make strides expanding its served available market in the life science and natural resource markets. Shares of FARO and FEIC are up 39% and 59% year to date, respectively. We believe both FARO and FEIC can continue to work higher in 2012, and we reiterate our Buy ratings on both stocks."
"Other Stocks Worth Watching In 2012: 2011 was a wild ride for investors in the 3D printer stocks, Stratasys (Nasdaq: SSYS) (Hold), and 3D Systems (NYSE: DDD)(Buy). Shares of both companies soared early in the year as investors focused on the adoption of 3D printing/rapid prototyping technology in the design and manufacturing markets. The market is being driven by new low-cost printers, improvements in the performance of materials and growing recognition of the benefits that 3D printing technologies afford manufacturers in accelerating time to market and improving product quality and reducing design errors. However, while the industry growth drivers are more favorable than at any time in recent memory, shares of both companies clearly got ahead of the fundamentals. The resulting sharp selloff left SSYS down 45% from its 52-week high and DDD down 49% from its peak earlier this year...We reiterate our Buy rating on DDD."
"Among the micro-cap names in our coverage universe, out top picks are LeCroy (Nasdaq: LCRY)(Buy), which is currently trading at less than 7x our current year EPS estimate, and Sypris Solutions (Nasdaq: SYPR)(Buy), which is trading at 3x EV/estimated 2012 EBITDA. SYPR recently announced a share repurchase, which if fully executed would translate to approximately 7% of the total shares outstanding at current prices."
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