Today Investor’s Business Daily presents a somewhat different perspective in an article titled Connector Maker Amphenol Copes With Rising Prices:
It’s hard to avoid: If a firm’s costs go up, its profits go down. Amphenol has impressed investors by bucking this logic.
The firm makes connectors, the thousands of different products that link electronic gizmos. Its connectors end up in cars, planes and almost any device that uses electric or fiber optic signals. It also makes cables.
To manufacture all this, it needs raw materials. They include gold, aluminum, copper and oil-based resin. Prices of those commodities have skyrocketed.
Yet with material costs rising, the firm managed to boost profits.
Raw materials were a “big head wind,” Shawn Harrison of Longbow Research said. “They were able to manage through that fantastically.”
How? Some of the price rises were passed on to customers. But mostly, analysts say, the firm kept other costs very low.
The article also includes this chart, which we think makes for a handy reference.
There is little doubt that Amphenol is well-managed and efficient. We just aren’t quite so sure about the assertion that skyrocketing raw materials costs acted as a headwind in the latest quarter.
Disclosure: author is long STREETTRACKS GOLD (GLD) at time of publication.