Amphenol Beats: We Expected Even More Oomph From the Latest Quarter

2007 First Quarter Results Reported by Amphenol Corporation:

Amphenol Corporation (APH) reported today that first quarter 2007 diluted earnings per share increased 39% to $.43 compared to $.31 per share for the comparable 2006 period. (All per share amounts included herein have been adjusted to reflect the Company’s 2 for 1 stock split effective in March 2007.) Such per share amount for 2007 includes the benefit of $.01 per share relating to a reduction in tax expense of approximately $1.5 million for tax reserve adjustments relating to the completion of the audit of certain of the Company’s prior year tax returns. Sales for the first quarter 2007 increased 14% to $651.0 million compared to $569.0 million for the 2006 period. Currency translation had the effect of increasing sales by approximately $14.5 million in the first quarter 2007 compared to the 2006 period.

Consensus estimates were for $0.41 on $641 million of sales. Adjusting for the tax benefit they beat by a penny (2.4%) on EPS and by 1.6% on the top line. This level of earnings surprise is less than we are accustomed to seeing from Amphenol.

Furthermore, we noted in October that the company’s margins are inversely related to copper prices:

The company had been implementing price hikes along the way as copper and energy prices soared (both are crucial inputs for the cable segment). However, there is a lag between when the company sees rising costs and when they can be fully passed along to customers. Margins were hurting during that lag time. Given the recent decline in energy prices and stabilization of copper prices, the company’s price increases appear to be catching up with costs.

Although copper prices rose late in the quarter, for much of the period they were near the low end of the recent range. Of course, now that the prices are once again rising the modest guidance increase appears appropriate. We just expected a little more oomph from the current quarter.

APH 1-yr chart: