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8/1/2019 | 2 MINUTE READ

Wall Street Upgrades Near-Term Outlook for Electronics Industry

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Late-term outlook projects increases in revenues and earnings in electronics.

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Wall Street’s latest near-term outlook for the electronics industry has markedly improved since Gardner Intelliegence’s last review of the industry based on third-quarter 2018 actual results and projections. Reported Q4 2018 and Q1 2019 revenues and earnings beat expectations significantly, in part due to better-than-expected economic and business conditions while America renegotiates its trade agreements with multiple major trading partners.

Based on data from among the 85 firms used in our study, actual year-over-year earnings growth ending in March was 3.3%, besting the Wall Street’s beginning-of-the-year consensus estimate of -1%. Actual first-quarter earnings growth of 4.9% was also significantly better than the expected 1.3% contraction in earnings. While recent results beat estimates, Wall Street’s outlook for 2020 has softened significantly, with expectations for revenue and earnings growth now both in single digits, down from the double-digit growth formerly expected.

Electronics manufacturing data collected from Gardner’s Business Index through May suggests that the industry is stabilizing after coming off nearly two years of accelerated growth. Year-to-date data for supplier deliveries, new orders and production suggest modest growth that is in line with historical norms. Contractionary data for both backlogs and exports have pushed the total index among manufacturers serving the electronics industry below 50, indicating a net contraction in business activity. The fact that total new orders continue to register above 50 while export activity contracts implies that domestic demand for electronics products is replacing lost demand from foreign consumers.

Gardner’s year-to-date survey data also suggest that electronics manufacturers are experiencing different business conditions depending on company size, with larger firms reporting strongly accelerating new orders, and firms with fewer than 50 employees reporting flat to contracting new orders. Nonetheless, production has remained stable even among smaller firms as they deplete backlogs.

Data are limited to firms that reported Q1 2019 actual results before this article went to press and released Q3 2018 actual results during Gardner’s prior study of the industry. All financial results published exclude Apple, Inc. due to Apple’s disproportionally large size in comparison with nearly all other firms in Gardner’s study.

 

About the Author

 

Michael Guckes

Michael Guckes is chief economist and director of analytics for Gardner Intelligence, a division of Gardner Business Media, Cincinnati. He has performed economic analysis, modeling, and forecasting work for more than 20 years among a wide range of industries. He received his BA in political science and economics from Kenyon College and his MBA from Ohio State University. Contact: (513) 527-8800; mguckes@gardnerweb.com. Learn more about the plastics processing Index at gardnerintelligence.com.

 

 


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