NEW YORK -- Macroeconomic issues will temper revenue and earnings growth among contract electronics manufacturers over the next few quarters, a leading industry analyst said last night.

While the broader industry touts book-to-bill ratios above 1.0, an indicator of future growth, economic concerns in Europe coupled with slower growth in the US and China suggest the fall quarters are likely to trend lower, wrote analyst Sherri Scribner of Deutsche Bank's Equity Research group.

DB forecasts top tier EMS companies will grow 7% sequentially in the third quarter and and 6% sequentially in the fourth, slightly lower than its previous estimates of 9% and 7%, respectively). Industrial and telecom are predicted to see the strongest growth, up 7% and 8% sequentially, on average, respectively.

Moreover, slowing growth will tamp margins, DB suggested. "The operating margin expansion begun in March 2009 has largely run its course," Scribner asserted. "Margins have historically peaked around 4% and we expect Celestica, Jabil and Sanmina-SCI to near this level by year-end, suggesting future operating margin improvements will be more difficult to obtain."

DB also noted continuing constraints for custom semiconductors, connectors, capacitors and memory, adding that relief might not come until the second half of the year.

• Prev
• Next