Although the technology sector is encountering some challenges, its prospects remain optimistic due to rapid digital transformation and growing internet penetration. As the demand for tech components grows, three tech stocks Amphenol Corp. (APH), CTS Corp. (CTS), and Kimball International (KBAL), could surge to new highs. Read more….
Despite facing recent challenges such as increasing inflation rates and mass layoffs, the technology sector remains resilient and well-prepared to overcome most market obstacles. This is due to the ongoing digital transformation in various industries, as well as the sector’s continuous innovation in product and service offerings.
Given this backdrop, tech stocks such as Amphenol Corporation (APH), CTS Corporation (CTS), and Kimball International, Inc. (KBAL) could be sound watchlist additions.
The technology sector is often subject to high levels of market volatility. But owing to some of its distinctive characteristics, such as rapid innovation and disruption, high growth potential, and a strong focus on research and development, the tech sector is well-positioned to stay afloat.
For example, even in the face of economic turbulence, global IT spending is projected to reach $4.6 trillion in 2023, an increase of 5.5% from last year, according to the latest forecast by Gartner, Inc. (IT).
While recessionary concerns continue to create market chaos, the tech sector remains resilient. The Technology Select Sector SPDR® Fund ETF (XLK) has gained 20.2% over the past six months compared to the S&P 500’s 8.6% increase.
On top of it, owing to rapidly increasing internet penetration, there seems to be high demand for electronic equipment as well. The global consumer electronics market is projected to reach $1.10 trillion by 2030, exhibiting a 4.7% CAGR. Furthermore, the global electronic components market is forecasted to reach $328.50 billion by 2031, growing at a 6.5% CAGR.
Overall, the technology sector is a dynamic and constantly evolving industry with unique characteristics that set it apart from other sectors of the economy. With this being said, let’s look at the stocks in detail.
Amphenol Corporation (APH)
APH is a designer, manufacturer, and marketer of electrical, electronic, and fiber optic connectors and interconnect systems, antennas, sensors and sensor-based products, and coaxial and high-speed specialty cable. It operates through three segments: Harsh Environment Solutions; Communications Solutions; and Interconnect and Sensor Systems.
On April 12, the company paid its first quarter 2023 dividend on its common stock in the amount of $0.21 per share. APH’s four-year average dividend yield is 0.94%, while its annual dividend of $0.84 per share translates to a 1.14% yield on prevailing prices.
Its dividend has grown at an 18.7% CAGR over the past three years and a 17.6% CAGR over the past five years. Also, it has a record of 11 years of consecutive dividend growth.
APH’s net sales increased marginally year-over-year for the first quarter that ended on March 31, 2023, to $2.97 billion. The company’s non-GAAP operating and net income came in at $597.10 million and $426.10 million, representing a marginal year-over-year increase, respectively. Also, its adjusted EPS increased 3% from the prior-year quarter to $0.69.
Analysts expect APH’s EPS for the fiscal year 2023 to increase marginally year-over-year to $3, while its revenue is expected to be $12.61 billion in the same period. The EPS and revenue are expected to reach $3.30 and $13.48 billion in the fiscal year 2024. Moreover, it topped the EPS estimates in each of the trailing four quarters, which is promising.
APH’s revenue, EBITDA, and net income have grown at CAGRs of 15.9%,17.4%, and 19.3% over the past three years, respectively. Likewise, its EPS grew at an 18.9% CAGR in the same period.
Over the past year, the stock has gained 6.6% to close the last trading session at $74.79.
APH’s POWR Ratings reflect this promising outlook. It has a B grade for Stability and Quality. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In the 59-stock Technology – Electronics industry, it is ranked #18. To see additional POWR Ratings of APH for Growth, Value, Momentum, and Sentiment, click here.
CTS Corporation (CTS)
CTS manufactures and sells sensors, actuators, and connectivity components in North America, Europe, and Asia. The company provides sensors and actuators, switches, temperature sensors, potentiometers, and fabricated piezoelectric materials and substrates.
On February 9, CTS‘ board of directors approved a new share repurchase program that authorizes the company to repurchase up to $50 million of its common stock. In addition, the company declared a dividend of $0.04 per share, payable to its shareholders on April 28, 2023.
CTS’ four-year average dividend yield is 0.52%, while its annual dividend of $0.16 per share translates to a 0.38% yield on the current prices.
CTS’ net sales came in at $145.99 million for the fiscal first quarter that ended March 31, 2023. The company’s net earnings amounted to $19.60 million and $0.61 per share in the same period.
Streets expect CTS’ revenue and EPS for the second quarter (ending June 30, 2023) to increase 5.5% and 2.7% year-over-year to $152.91 million and $0.64, respectively. Also, CTS’ revenue, EBITDA, and net income grew at CAGRs of 7.8%, 15.5%, and 18.1% over the past three years, respectively. Likewise, its EPS has grown at a CAGR of 19.3% in the same period.
The stock has gained 24.6% over the past year to close the last trading session at $40.63.
It’s no surprise that CTS has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Quality and a B for Momentum. Within the same Industry, it is ranked #3.
In addition to the POWR Ratings we stated above, we also have CTS ratings for Growth, Value, Stability, and Sentiment. Get all CTS ratings here.
Kimball International, Inc. (KBAL)
KBAL is an omnichannel commercial furnishings company with expertise in the workplace, health, and hospitality markets. Its portfolio of furniture products and services are sold across all business units under the Kimball, Interwoven, Poppin, DStyle, National, Etc., and Kimball Hospitality brands.
The company’s four-year average dividend yield is 3.24%, while its annual dividend of $0.36 per share translates to a 2.96% yield on prevailing prices. Its dividend has grown at a 5.9% CAGR over the five years. It paid a quarterly dividend of $0.09 per share for all outstanding shares of common stock on April 14, 2023.
During the fiscal 2023 second quarter that ended on December 31, 2022, KBAL’s net sales increased 20.8% year-over-year to $182.95 million, while its gross profit grew 42.4% from the prior-year quarter to $66.14 million.
The company’s adjusted operating income and net income came in at $11.46 million and $2.99 million versus an adjusted operating and net losses of $416 million and $5.70 million, respectively. Also, its adjusted EBITDA improved 296.9% from the year-ago value to $16.04 million.
In addition, its cash and cash equivalents for the period amounted to $14.07 million compared to $10.93 million as of June 30, 2022.
KBAL’s revenue grew at CAGRs of 1.1% over the past five years. Likewise, its total assets grew at a CAGR of 1.3% over the past three years.
Analysts expect KBAL’s revenue and EPS for the fourth quarter (ending June 30, 2023) to increase 13.6% and 15.3% year-over-year to $201 million and $0.28, respectively. The company has an impressive earnings surprise history, as it surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
KBAL’s shares have gained 74.1% over the past six months and 88.3% year-to-date to close the last trading session at $12.24.
KBAL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It also has a B grade for Value. In the same industry, it is ranked #13. Click here to see the other ratings of KBAL for Growth, Momentum, Stability, Sentiment, and Quality.
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APH shares were unchanged in premarket trading Friday. Year-to-date, APH has declined -1.50%, versus a 8.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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