ANALYST(S): DUNNE, KEITH
July 9th 1998
ÿRATING: BUY
ÿDownload PDF
ÿ
Synopsis:
The following synopsis is qualified in its entirety by the more detailed information contained in the full research report, including the discussion of certain risks associated with an investment in this security contained in "Investment Risks."
Hadco announced 3Q98 EPS should be near a $0.50 loss, well below consensus estimates but in line with our sensitivity analysis which equated every $5 million revenue shortfall with about a $0.20 per share earnings decline.
3Q revenues should be near $194 million, $11 million less than our estimate, 14% below proforma 2Q revenues, and 12% less than last year excluding the Continental acquisition, partially due to 6-8% lower pricing vs. last quarter. Importantly, order trends over the past few weeks appear to be improving, though the threat from Taiwan has not disappeared.
Management plans to aggressively lower the cost structure to breakeven levels on similar volumes by next quarter. Key areas include material costs, manufacturing yields, ramp-up of the Austin/Malaysia plants and labor productivity.
We are reducing our FY98 and FY99 EPS estimates to $0.75 and $1.75, from $1.60 and $2.75, respectively, mostly to reflect lower volumes and pricing pressure.
Hadco is trading at 1.5x book value, an enterprise value of 3.9x cal-99E EBITDA, and 9.4x our cal-99 EPS estimate. We believe it is time to start buying the stock.
ÿ
ÿ ÿ
ÿ |
