Japanese electronics makers have been slammed by both slowing exports and a strengthening yen. Barron's Neil A. Martin points to one exception - Kyocera (NYSE: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.
- On Thursday, the European Commission approved Kyocera to acquire German office automation products company TA Triumph-Adler.