Diversified electronics manufacturer Amphenol Corporation (APH) is scheduled to report its third-quarter 2014 results before the opening bell on Oct 22. In the last reported quarter, Amphenol’s earnings comfortably exceeded the Zacks Consensus Estimate by 4 cents. Let’s see how things are shaping up for this announcement.

Growth Factors in the Third Quarter

During third-quarter 2014, Amphenol inked a definitive agreement to acquire the Casco Automotive Group for about $450 million in order to augment its presence in the automotive market. Headquartered in Bridgeport, CT, Casco Automotive is one of the leading suppliers of highly engineered data connectivity, power, charging and sensor products in the automotive market.

Amphenol is likely to leverage on Casco Automotive’s complementary product offerings to strengthen its position in the automotive market that is likely to witness healthy growth with a broad proliferation of electronic applications. The acquisition is expected to be accretive from the very first year of its operation.

Amphenol will also bring about a two-for-one stock split in October this year. The strategic move is expected to increase the liquidity of the stock and lead to more trading as the number of outstanding shares is doubled and share price halved. This in turn might further drive up share prices as more small investors buy the stock and boost demand.

Despite the uncertainties prevailing in the global economy, the ongoing revolution in electronics enables the company to capitalize on potential opportunities and strengthen its position in the market. The diversification in end markets with a consistent focus on technology innovation and customer support through all phases of the economic cycle is likely to further help Amphenol to mitigate its operating risks.

Earnings Whispers

Despite inherent business strengths, our proven model does not conclusively show that Amphenol is likely to beat earnings this quarter as it lacks the key ingredients for a success recipe.

Zero Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -1.75%. This indicates a likely miss in earnings.

Zacks Rank #3 (Hold): Amphenol’s Zacks Rank #3 when combined with -1.75% ESP reduces the predictive power of ESP. Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Arch Capital Group Ltd. (ACGL) earnings ESP of +2.07% and Zacks Rank #2.

Abaxis, Inc. (ABAX) earnings ESP of +4.55% and Zacks Rank #2.

Nordson Corporation. (NDSN) earnings ESP of +0.88% and Zacks Rank #2.

Read the Full Research Report on APH
Read the Full Research Report on ABAX
Read the Full Research Report on NDSN
Read the Full Research Report on ACGL


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