July 18, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of electronics and fiber optic connector manufacturer Amphenol (NYSE: APH ) are rallying as much as 16% after the company announced it was raising its full-year sales and profit forecasts.
So what: The morning began with Amphenol slightly beating Wall Street's earnings and sales expectations for the second quarter by reporting a profit of $0.86 on a 4% rise in sales to $1.06 billion. The big news was Amphenol's bullish outlook, which prompted the company to boost its full-year revenue forecast to $4.21 billion to $4.25 billion from its prior range of $4.11 billion to $4.19 billion, and upped its EPS expectations to a range of $3.38-$3.44 from $3.30-$3.38. Amphenol's CEO, R. Adam Norwitt, commented that revolutionary new technologies are driving demand higher.
Now what: Before you get too excited... stop! I applaud Amphenol for the earnings boost, but overall we're looking at a midpoint improvement in full-year EPS of just 2%, and the stock is reacting higher by 16%! Sales growth is tepid in the mid-single-digits and the company caters to the telecom and military sectors, which haven't exactly been spending the big bucks of late. In addition, we've witnessed countless earnings warnings from telecom equipment makers over the past few months. I'd take today's optimism as an impetus to consider exiting Amphenol.
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