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Molex Inc. swings to a profit, resumes growth

by Alexa Harrison
Jan 27, 2010

Molex Inc. swung to a profit on higher revenues, cost cutting and restructuring, but fell below Wall Street expectations. 

Net income for the quarter ended Dec. 31 was $19.3 million, or 11 cents per diluted share, compared with a loss of $87.2 million, or 50 cents per diluted share, in the year-ago quarter, when the company booked a goodwill impairment charge of $93 million.

Molex’s adjusted earnings of 24 cents per diluted share, which excluded a restructuring charge, topped the analysts' consensus estimate compiled by Bloomberg LP of  22 cents per diluted share.

Second quarter net revenue increased to $729.6 million, or 9.4 percent, from $666.7 million in the year-ago quarter.

“Revenue was well above our prior guidance. We had a 1.07 book-to-bill ratio,” said Martin Slark, Molex chief executive officer, in a statement. “Margins improved due to higher revenue, cost containment and favorable impact of restructuring.”

The company lowered its year-over-year restructuring and asset impairment charges to $25.6 million from $39.8 a year ago, a 36 percent decrease.

“The restructuring program, which will be completed sometime in the middle of calendar 2010, will be extremely beneficial,” said Shawn Harrison, an analyst for Longbow Research LLC in Ohio.

"It's put them on a more cost competitive stance. It's severely reduced the complexity of the business,” said Harrison. “Without that restructuring program, which equals $205 million of annualized savings, the company wouldn't be in the financial position it's in right now."

Stephen Simko, an analyst for Morningstar Inc., wrote in a note, “Strong demand for products such as TVs and smartphones, strong consumer spending in Asia (where Molex has a very large presence), and slowing price erosion are all reasons Molex expects that sales and margins will keep expanding in the coming quarters.”

Molex projected sales for the quarter ending in March to range from $715 million to $735 million, compared with $505.5 million a year ago. Analysts estimate earnings per share to be  21 cents, while the company expects a range of 18 cents to 22 cents per diluted share. In last year's March quarter Molex earned 34 cents per diluted share.

Earnings for the six months ended Dec. 31 were $7.7 million, or 4 cents per diluted share, compared with a loss of $42.9 million, or 24 cents per diluted share, in the same six months of 2008. Net revenue drooped to $1.4 billion in the six months from $1.5 billion, a 6.8 percent decrease.

Molex stock closed at $20.87, up 3 cents.