Valor International reported that Foxconn, a producer of Apple’s (AAPL) iPhone, will be creating a direct-to-consumer store in Brazil. The factory will be in Brazil, and will employ between 5,000 to 10,000 people until 2016. While Apple enjoys healthy profit margins from stringent control of its supply chain and costs, electronic contracting manufacturing services face a tougher time maintaining profit growth. The sector is the first to suffer when the economy worsens.
Apple’s growth benefited Foxconn. Foxconn now has 50% of the world’s electronic contracting manufacturing services market, after Foxconn generated revenue of $17.1 billion.
Do you want to add manufacturing services to your watch list? Companies in the contracting manufacturing sector include:
List Average 1-Year Return: 22%
1. Flextronics International Ltd. (FLEX, Earnings, Analysts, Financials): Provides design and electronics manufacturing services to original equipment manufacturers of a range of products in the infrastructure; mobile communication devices, computing, consumer digital devices, industrial, semiconductor capital equipment, clean technology, aerospace and defense, white goods, automotive and marine, and medical devices markets. Market cap at $4.14B, most recent closing price at $6.22.
Flextronics earned 20% less revenue in its first quarter. Revenue declined when the product mix included less of the high velocity solutions business. The company is scheduled to report second quarter earnings on Thursday October 18 after market close.The company expects margins to improve by 3.5%. In the cell phone space, the company looks forward to ELIC (“Every Layer Interconnect Technology”) technology. The technology enables more advanced products to be designed and built on the printed circuit boards.
2. Celestica Inc. (CLS, Earnings, Analysts, Financials): Provides electronics manufacturing services and solutions to original equipment manufacturers (OEMs) in the consumer, communications, enterprise computing, industrial, aerospace and defense, healthcare, and green technology sectors in Asia, the Americas, and Europe. Market cap at $1.43B, most recent closing price at $7.59. In its last quarter, Celestica reported $0.22 earnings per share. The consensus estimate was $0.24. Revenue for the quarter was down 4.6% on a year-over-year basis.
3. Jabil Circuit Inc. (JBL, Earnings, Analysts, Financials): Provides electronic manufacturing services and solutions in the Americas, Europe, and Asia. Market cap at $4.43B, most recent closing price at $21.55. Jabil is scheduled to report earnings on September 25th after the market closes.
Investors interested in adding chip makers and related products to their watch list should consider:
4. Applied Materials Inc. (AMAT, Earnings, Analysts, Financials): Provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. Market cap at $14.17B, most recent closing price at $11.45.
5. KLA-Tencor Corporation (KLAC, Earnings, Analysts, Financials): Engages in the design, manufacture, and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Market cap at $7.94B, most recent closing price at $47.66.
6. ASML Holding NV (ASML, Earnings, Analysts, Financials): Engages in designing, manufacturing, marketing, and servicing semiconductor processing equipment used in the fabrication of integrated circuits. Market cap at $22.65B, most recent closing price at $53.94.
Written by Chris Lau. To interact and discuss these picks with users, attach your watch list or portfolio to your friends on Kapitall. Message the author. He is ranked sixth (by points) on the all-time leaderboard. The leaderboard is located on your score icon -> Leaderboard. Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed for goods at the Kapitall store.
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Flextronics International Ltd. (FLEX, Chart, Download SEC Filings)
- Celestica Inc. (CLS, Chart, Download SEC Filings)
- Jabil Circuit Inc. (JBL, Chart, Download SEC Filings)
- Applied Materials Inc. (AMAT, Chart, Download SEC Filings)
- KLA-Tencor Corporation (KLAC, Chart, Download SEC Filings)
- ASML Holding NV (ASML, Chart, Download SEC Filings)
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