RBC Capital Markets Lifts Sanmina Price Target After Solid Q1 Print

Sanmina Corp SANM reported strong first-quarter results Monday across all end markets and noted an improvement in lead times.

The company has significant exposure to communication and optical revenues, which have bottomed and are showing signs of growth, according to RBC Capital Markets.

The Analyst

Analyst Mitch Steves maintains a Sector Perform rating on Sanmina and raised the price target from $28 to $33.

The Thesis

Sanmina reported its revenue and EPS at $2.188 billion and 83 cents, respectively. The results came in higher than the estimates, with a better-than-expected operating margin of 3.9 percent, Steves said in a Tuesday note. 

The communications segment recorded 13-percent sequential growth, driven by strength across the entire platform. The industrial, medical, automotive and defense segments were up 18 percent. Cloud solutions grew 21 percent, backed by stronger seasonal growth.

Sanmina guided to revenues and EPS of $1.9-2 billion and 70-80 cents, ahead of the consensus expectations of $1.825 billion and 66 cents, respectively.

RBC raised its EPS estimate for 2019 from $2.70 to $2.85. Steves cautioned that Sanmina has a track record of mixed revenue execution.

If the company can sustain growth and margins expand to above 4 percent, an upgrade to a bullish stance may be warranted, the analyst said. 

Price Action

Sanmina shares were soaring 19.38 percent to $32.53 at the time of publication Tuesday. 

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