Amphenol Corporation: Under-the-Radar EV Company Reports Record Q3 & Raises Dividend

Amphenol Stock Is Bullish

With a market cap of $50.4 billion, you could hardly call Amphenol Corporation (NASDAQ:APH) an overlooked stock. But it’s not an electric vehicle (EV) stock you hear people talking about, which is incredible.

Oft-ignored APH stock has been quietly beating the broader market. In fact, it has one of the most consistent growth trajectories on Wall Street. For the last 20 years, Amphenol stock’s total return is 2,914%. Over the same period, the S&P 500 has rallied by 301%.

Not surprisingly, APH stock has done exceptionally well since the stock market bottomed in March 2020. As of this writing, Amphenol stock is up by:

  • 23% over the last six months
  • 30% year-over-year
  • 175% since bottoming in March 2020
  • 60% from its pre-pandemic sell-off level

Chart courtesy of StockCharts.com

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You can’t ask for much more than that, especially when COVID-19 plunged much of the global economy into a recession.

The outlook for Amphenol Corporation is robust. The company recently reported record third-quarter results, increased its quarterly dividend, and—despite market uncertainty—provided strong guidance for the fourth quarter and full year.

About APH Stock

Amphenol is one of the world’s largest designers and manufacturers of connectors, interconnect systems, antennas, sensors, and high-speed cable. (Source: “Markets,” Amphenol Corporation, last accessed January 7, 2022.)

The company sells its electronic components to clients in the U.S., China, and other countries.

Amphenol operates through two segments: Interconnect Products and Assemblies, and Cable Products and Solutions. (Source: “Amphenol Reports Record Third Quarter 2021 Results and Announces Dividend Increase,” Amphenol Corporation, October 27, 2021.)

The Interconnect Products and Assemblies segment designs, manufactures, and markets a range of connectors and connector systems, value-add products, and other products.

The Cable Products and Solutions segment designs, manufactures, and markets cables, value-added products, and components for use primarily in the broadband communications and information technology markets.

Amphenol Corporation serves clients in the automotive (including EV), broadband communications, commercial aerospace, industrial, information technology, data communications, military, mobile device, and mobile network markets.

Record Third-Quarter Results

In late October 2021, Amphenol Corporation announced that its revenue for the third quarter ended September 30 increased 21% year-over-year and 13% organically to a record $2.8 billion. (Source: Ibid.)

The company’s third-quarter net income came in at a record $426.5 million, or $0.67 per share. Its adjusted earnings per share went up by 18% to a record $0.65. Its third-quarter operating cash flow was $328.0 million and its free cash flow was $238.0 million.

Back in April 2021, Amphenol Corporation closed on its previously announced acquisition of MTS Systems Corporation. (Source: “Amphenol Completes Acquisition of MTS Systems,” Amphenol Corporation, April 7, 2021.)

Amphenol expects the “MTS Sensors” business to bring in approximately $350.0 million in sales in the first 12 months after the deal closes. MTS Sensors is expected to be $0.05 accretive to Amphenol’s earnings per share in the first 12 months, which excludes acquisition-related expenses and reflects the company’s recent two-for-one stock split.

Business Outlook

The current economic climate is uncertain, with significant supply-chain and inflationary challenges, along with the COVID-19 pandemic.

Given these issues, for the fourth quarter of 2021, Amphenol Corporation expects to report:

  • Revenue in the range of $2.69 billion to $2.75 billion, for year-over-year growth between 11% and 13%
  • Adjusted earnings per share in the range of $0.61 to $0.63, for growth between seven percent and 11%

For full-year 2021, Amphenol Corporation expects to report:

  • Sales in the range of $10.5 billion to $10.6 billion, representing 23% growth over its 2020 sales
  • Adjusted earnings in the range of $2.39 to $2.41 per share, representing 28% to 29% growth over the 2020 adjusted earnings

Amphenol Corporation Increases Dividend by 38%

Because of the company’s healthy cash flow generation, Amphenol Corporation was able to return value to Amphenol stockholders in the third quarter. This included repurchasing 2.3 million shares of its common stock for $171.0 million.

The company also paid dividends of $87.0 million in the third quarter, resulting in total capital returned to shareholders of $258.0 million during the quarter.

On October 26, Amphenol Corporation’s board approved a 38% increase in its quarterly dividend from $0.145 to $0.20 per share, for a yield of 0.95%.

Analyst Take

My bullish take on Amphenol Corporation hasn’t really changed since I last wrote about it in October 2020.

The revolution in electronics has been accelerating, which has been creating exciting long-term growth opportunities for Amphenol across each of its end markets, particularly the EV market.

In spite of the pandemic, Amphenol Corporation was able to report record fourth-quarter 2020 results. The good times continued in 2021, with the company’s strategic acquisition of MTS Systems Corporation, new stock repurchase program, record second-quarter and third-quarter results, increased dividend, and strong guidance.

As such, the future looks bright for APH stock.