Kyocera Is Ready for a Rebound - Barron's

Japanese electronics makers have been slammed by both slowing exports and a strengthening yen. Barron's Neil A. Martin points to one exception - Kyocera (KYO) - that looks ready to excel when the economy recovers.

Kyocera has strong positions in solar panels, cellphones, ceramic components and office and telecomm equipment. It has nearly $9B in cash and virtually no debt. Shares are trading near $65, down from over $100 in June, and bulls think the stock will recover to around $90 considering the company's cash alone is worth $45/share.

Like other industry players, Kyocera saw growth slow and profits fall as the economic crisis unfolded worldwide. The company nearly halved its profit forecast for the year ending in March to ¥295 ($3.29) per share. Yet even the reduced outlook provides a better year-on-year performance than most electronics makers.

Kyocera is cheap, trading at just 0.88 times sales (vs. 0.91 for peers) and at 0.78 times book value (vs. 1.03 for peers). Fans say the company has a strong history of making cheap acquisitions and then integrating them successfully.

The company's solar business is the key earnings driver, making up around half of per-share profits. Bulls argue Kyocera's position as the world's fourth-largest solar-cell producer will outweigh the negative effect of a strong yen on European market sales. President Kawamura admitted that 'the weak euro is hurting profit margins in Europe,' an area that accounts for 45% of the firm's solar sales, but maintained 'demand for solar energy is generally good.'

• Peter Boardman, of Tradewinds Global Investors, calls Kyocera 'a solid defensive play' with 'tremendous potential.' "It definitely has a number of attractive qualities... The important point is that despite the guidance revision, the company is still earning money."

• Marc Levinson, of JPMorgan, says Kyocera is one of his favorite ways to play solar right now, considering its strong balance sheet and upside potential in different areas of business.

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• On Thursday, the European Commission approved Kyocera to acquire German office automation products company TA Triumph-Adler.

Comments

[searcher:]

Even if it ain't earning money for a couple of periods in the future, it's a survivor that will prosper.

Jan 25 01:57 PM

[kilauea50:]

This article was horrible drivel. Nintendo has a pile of cash and no debt either and is down 54% from its recent high last June, with a dividend yield of 5.6%!!! Kyocera's "strong position" in cellphones is quite suspect, and the other businesses it is involved in are struggling terribly, even companies with better positions than Kyocera can't make money. Motorola has a "strong position" in cellphones as global #4? after slipping behind Samsung and now LG, but I wouldn't want to own those shares. I don't know where I'd place Kyocera on that list -- they probably get outsold by Apple. Solar may be the earnings driver over the next decade, but with oil at $50 it's going to be pretty tough to get people excited about at $4000+ solar water heater. I'm all for it, but economics trumps green in this economy. When Kyocera reports Q3 earnings later this week, it is likely to revise down. By one analysts' estimate EPS will drop by Y133 to Y161 (-55%). That would put its PER multiple on a lofty 36x. Next year analysts forecast EPS of only Y114, for PER 53x. THAT is not cheap. The stock was up 7.5% at one point in Tokyo today, I doubt it repeats that performance in New York, as it closed up only 2.3%. I recommended clients to short it.

Jan 26 02:58 AM

[djusasomthin:]

If you go to their website you'll see that Kyocera has recently merged (at least it cellphone division) with Sanyo, so the two of them combined will probably do alright, not to mention the Qualcomm division of Kyocera which makes parts (componants) for most of the other cellphone manufacturers.

Jan 26 05:45 PM

[kilauea50:]

do you know anyone with a Sanyo cellphone?

Jan 27 06:05 PM