What happened
Shares of Amphenol (APH 3.31%) climbed 10.2% in September, according to data from S&P Global Market Intelligence. The stock benefited from momentum for the broader market and the publication of research reports that boded well for the company's outlook in industrial sensors.
The electronic components company's shares rose early in the month amid reports that the U.S. and China would aim to arrive at some manner of trade truce when talks resumed. The stock saw some additional momentum after the two countries delayed and exempted certain goods from tariffs.
Image source: Amphenol.https://www.amphenol.com/about/news_archive/2019/amphenol-sine-systems-armor-ipxtm-enclosures
So what
Amphenol specializes in connectors and sensors used in electronic devices, and it generates nearly a third of its sales from the Chinese market. The company has noted that the U.S.' ban on companies doing business with Huawei has had a significant impact on the communications equipment market. Increased uncertainty for distributors in Amphenol's key markets can be expected to weigh on performance, and news suggesting a reduction of tensions between the U.S. and China will likely lift the business' outlook.
In addition to a smattering of good news on the trade front last month, Amphenol stock may also have benefited from new reports on the sensor market. Absolute Market Insights published a report on Sept. 11 projecting that the market for gas industry sensors will expand at a 5.6% compound annual growth rate from 2018 through 2026.Research and Markets then published its own report on the global temperature sensor industry on Sept. 14, detailing expectations for revenue to grow at a 6.8% compound annual growth rate from 2017 through 2026, and reach $9.56 billion in annual sales at the end of that period.
Now what
Amphenol is seeing significant demand slowdown in the communications, industrial, and automotive markets, and the business is carrying out cost-reduction initiatives in order to smooth out earnings performance. The company is scheduled to report third-quarter earnings on Oct. 23 and is guiding for sales to come in between $1.96 billion and $2 billion, with the midpoint guidance representing a 7% decline year over year. Management expects non-GAAP (adjusted) earnings per share fore the period to be between $0.86 and $0.88, representing a nearly 14% decline at the midpoint of the target.
Shares trade at roughly 27 times this year's expected earnings and have a dividend yield of 1%.
