2012 outlook for EMS sector upside


Most electronics manufacturing services outfits, EMS companies, have recovered handily from the lowest points in November, but most of these remain significantly off of their highs over the last year. Some may argue that their charts have moved out of their downward trends now. What is interesting is that with the US breaking away from the woes of Europe and with the aftermath of the Thai floods abating somewhat, it is possible that these EMS stocks could offer significant value in 2012 and for long-term investors.

Benchmark Electronics Inc. (NYSE: BHE), Celestica Inc. (NYSE: CLS), Flextronics (NASDAQ: FLEX), Jabil Circuit Inc. (NYSE: JBL), and Sanmina-SCI Corporation (NASDAQ: SANM) all hang in the balance. Unfortunately, the consumer move to Apple Inc. (NASDAQ: AAPL) and Apple’s use of Foxconn is another wildcard (even with its suicide problems) because much of the business goes in that direction. Still, upside remains in some of these names as most of these companies get business from multiple sectors outside of technology manufacturing.

We have looked at the current share price along with recent share performance. Also considered is the fundamental trends behind each, as well as the consensus price target from Thomson Reuters and current and forward price/earnings analysis.

The good news is that these companies add and contract with the global trends. A slower India and China are not helping, but Japan has been coming back on after last year’s earthquake and tsunami wiped out the Japanese growth story. These companies are also tending to a poor European situation right now. Most earnings estimates for the year have already come down in recent weeks, but the question is whether or not those have come down enough.



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