J.P Morgan Raises Molex PT To $32 Following Earnings Results

Molex

FQ2 results were solid with higher revenue and better operating expense leverage driving EPS $0.03 above J.P Morgan's forecast. FQ3 guidance was more positive than negative as a stronger revenue outlook was offset by lower gross margin due to higher commodity costs leaving EPS just in-line with our above-consensus forecast. J.P Morgan recently upgraded Molex to Overweight on Jan. 18 as it believes attractive exposure to the faster growing connector markets such as mobile devices and mobile networking equipment, data networking, esp. tablets, storage and servers should provide breathing room as the company strives to improve margins through realigned manufacturing and distribution. For Molex, unlike its peers, J.P Morgan sees potential for margin upside driven by better execution. We forecast above-peer revenue and earnings growth and hence do not believe MOLX deserves a discount valuation. JPM reiterates its Overweight rating and raises the PT to $32. FQ3 guidance is mostly healthy with revenue of $850-890M with the midpoint down 3.5% q/q and $19.4M above the prior forecast. EPS of $0.40-0.44 ex. $0.01 of litigation costs is in-line with JPM's prior $0.42. J.P Morgan calculates EPS and revenue guidance imply FQ3 operating margin falls to ~11.8% vs. FQ2's 12.4%. MOLX is trading higher at $27.10