Articles

NEW YORK – Credit Suisse analyst William Stein gave the EMS industry an “underweight” rating while initiating coverage of the sector. This rating means the industry is expected to perform worse than the broad market standard during the next year.

Called a “tough industry,” EMS companies have been impacted by congestion in expensive regions, particularly in the U.S. and Western Europe leading up to 2000, said Stein. He continued, “EMS companies … generate positive cash flow, and have enough liquidity to weather any reasonable industry downturn," even though they have some fundamental problems.

"Industry-wide utilization rates of approximately 60% in high-cost regions drive hyper competition, affording these companies no pricing power over their OEM customers," Stein explained.

When Credit Suisse started coverage of EMS providers, Flextronics International Ltd. received an "outperform" rating, while Stein rated Jabil, Sanmina-SCI, Benchmark Electronics, Inc., and Plexus Corp. "neutral." Solectron Corp. and Celestica Inc. were rated "underperform" by the analyst.