Downgrade Hits Contract Manufacturers
Friday October 4, 12:49 pm ET
biz.yahoo.com.
LOS ANGELES (Reuters) - Shares in contract electronics manufacturers fell sharply on Friday after Credit Suisse First Boston downgraded three companies in the sector on concerns about the timing of a recovery in the industry.
The downgrade battered the entire sector, with three companies falling to all-time lows on the reaction.
CSFB analyst Michael Walker cut Celestica Inc. (Toronto:CLS.TO - News; NYSE:CLS - News) and Benchmark Electronics Inc. (NYSE:BHE - News) to "neutral" from "outperform" and cut Sanmina-SCI Corp. (NasdaqNM:SANM - News) to "underperform" from "neutral."
Celestica shares were off 11.2 percent, or $1.36, to $10.74 in Friday midday trading on the New York Stock Exchange after hitting an all-time low of $10.60. Shares in Sanmina-SCI were off 12.1 percent, or 37 cent, at $2.70 on Nasdaq after hitting a session low of $2.61. Benchmark shares were off 16.4 percent, or $3.27, at $16.67 after hitting a session low of $14.50, a level not seen since Sept. 21, 2001.
The steep downward drop in those stocks pulled down shares of their competitors as well.
Shares of Jabil Circuit Inc. (NYSE:JBL - News) were off 10.4 percent, or $1.53, at $13.17 after hitting an all-time low of $13.11. Solectron Corp. (NYSE:SLR - News) shares were off 5.5 percent, or 11 cents, at $1.90 after hitting a session low of $1.84. Meanwhile shares of Flextronics International Ltd. (NasdaqNM:FLEX - News) were off 3.9 percent, or 28 cents, at $6.90 after hitting a session low of $6.75 in midday Nasdaq trading.
Shares of smaller sector companies trading lower on Nasdaq including Plexus Corp. (NasdaqNM:PLXS - News), down 6.5 percent, or 59 cents, at $8.43 after hitting an all-time low of $8.36; and Pemstar Inc. (NasdaqNM:PMTR - News), off 5.1. percent, or 7 cents, at $1.31, just off their session low of $1.30.
CSFB's Walker, in addition to the downgrade, cut his estimate of Celestica's 2003 earnings to $1.03 from $1.30 and reduced Sanmina's 2003 estimate to 15 cents from 25 cents.
"We believe that the broad end market landscape has not stabilized, as previously assumed, but rather is likely to further deteriorate well into 2003," Walker wrote in a research note.
He said electronics manufacturing service companies, already facing capacity utilization rates of only 50 percent, will probably have to restructure again as a result.
Contract manufacturers have been heavily battered over the last two years by the global economic slowdown, as their customers have struggled, leaving the manufacturers with too much capacity, too many employees and heavy pressure on their already thin margins.
Many have entered into major restructuring plans, cutting capacity and headcount in higher-cost regions like the U.S. and western Europe in favor of lower-cost production in places like China and eastern Europe. |
