Morgan Stanley Appreciates Amphenol's Growth Profile, Defensive Nature

Amphenol Corporation (NYSE: APH), a designer, manufacturer and marketer of electrical and fiber optic connectors, boasts a better growth profile compared to its peers with more defensive attributes, according to Morgan Stanley.

The Analyst

Morgan Stanley's Craig Hettenbach upgraded Amphenol from Equal-Weight to Overweight with a price target lifted from $95 to $102.

The Thesis

Amphenol has built itself a track record of being more defensive in times of uncertainties, which is ideal as the semiconductor industry is showing signs of cyclical risks heading into 2019, Hettenbach said in a note. In fact, during the prior semiconductor downturn of 2015 the company saw a 6-percent negative EPS revision versus the median decline of 11 percent and operating margins fell only 300 basis points during the 2008 recession versus the median of 1,200 basis points.

In addition to the company's defensive business model, management boasts a better growth profile compared to its peers after being a "prolific acquirer" since 2014, the analyst said. The company bought GE Advanced Sensors Business to enter the industrial and auto sensors market and has since completed another five acquisitions which can generate synergies between the connector and sensor businesses, including product development and co-package solutions. As a result, the company could deliver a 10-year revenue compounded annual growth rate of 8 percent versus 4.1 percent for analog semi peers.

Price Action

Shares of Amphenol were trading marginally higher at $94.96.

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