J.P Morgan Comments On Amphenol Following Solid Earnings and Guidance

Amphenol's APH Q4 results were above J.P Morgan's estimates and Q1 and FY-11 guidance were considerably above prior forecasts driven by robust smartphone and tablet revenue within the Mobile Devices category, ramping demand from the small but rapidly growing Automotive business, and continued strong y/y growth from Military Aerospace. Midpoint Q1 revenue guidance is up 21% y/y although full year guidance suggests growth substantially slows in the later quarters. JPM doesn't lose sleep over APH's premium valuation as it thinks its attractive end market exposure and unique corporate structure reduce downside risk to revenues and margins in the event of macro headwinds or continued metal price increases. Q4's 20.1% operating margin was above JPM's 19.9% estimate on an impressive 27% contribution margin in the face of rising metal costs. FY-11 EPS guidance implies a ~25% contribution margin. JPM expects tighter pricing to prevent contribution margin improvement if raw materials price increases abate. JPM has a $57 PT and Neutral rating on APH APH is trading lower at $52.61