The tech sector has suffered immense sell-offs since the start of the year driven in-part by the Federal Reserve’s hawkish stance to combat inflation and increasing geopolitical uncertainties. However, rising technology investments, strong corporate earnings, and the need for tech advancements across various industries have bolstered the sector's growth. According to Wedbush analyst Dan Ives, this might be an opportune time to aggressively own tech names because the sector looks oversold.
Also, David Groombridge, VP Analyst, Gartner, stated, "CEOs know they must accelerate the adoption of digital business and are seeking more direct digital routes to connect with their customers." Furthermore, emerging technologies, such as artificial intelligence, cloud computing, and AR & VR, are expected to fuel sector demand. According to Gartner, worldwide IT spending is expected to reach $4.4 trillion in 2022, increasing 4% from 2021.
Given this backdrop, we think it could be wise to add the stocks of fundamentally sound technology companies Jabil Inc. (JBL), CTS Corporation (CTS), Arrow Electronics, Inc. (ARW), Brother Industries, Ltd. (BRTHY), and Sanmina Corporation (SANM) to one's watchlist now.
Jabil Inc. (JBL)
Headquartered in Saint Petersburg, Fla., JBL provides manufacturing services and solutions worldwide. The company has two operational segments: Electronics Manufacturing Services, and Diversified Manufacturing Services. It provides electronics design, production, and product management services.
Last month, JBL launched of the Qfinity, an autoinjector platform, a simple, reusable, and modular solution for subcutaneous (SC) drug self-administration, at a lower cost than market alternatives, backed by the emerging prioritization of sustainable drug delivery within the pharmaceutical industry. JBL has been a trusted partner to one of the leaders in healthcare brands for over 30 years, and now the company is offering the Qfinity autoinjector platform to help patients self-administer a variety of injectables, including larger volume, higher viscosity medicines.
For the second quarter, ending Feb. 28, 2022, JBL's net revenue increased 10.6% year-over-year to $7.55 billion. Its operating income grew 32.6% from its year-ago value to $313.00 million, while its net income grew 46.1% from its prior-year quarter to $222.00 million. The company's EPS rose 52.5% year-over-year to $1.51.
Analysts expect JBL's revenue to increase 13.9% year-over-year to $8.22 billion for its third quarter, ending May 31, 2022. The $1.62 consensus EPS estimate represents a 24.5% improvement year-over-year for the third quarter, ending May 31, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 9% in price over the past year.
JBL's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has a B grade for Growth, Sentiment, and Value. Within the C-rated Technology - Services Industry, it is ranked #5 of 80 stocks.
To see additional POWR Ratings for Stability, Quality, and Momentum for JBL, Click here.
CTS Corporation (CTS)
Headquartered in Lisle, Ill., CTS manufactures and sells sensors, actuators, and connectivity components in North America, Europe, and Asia. The company provides sensors and actuators for use in passenger and commercial vehicles, connectivity components for telecommunications infrastructure, information technology, and other high-speed applications.
During the first quarter, ending March 31, 2022, CTS' net sales increased 15% year-over-year to $147.70 million. Its operating earnings grew 40.8% from its year-ago value to $26.05 million, while its adjusted net earnings amounted to $21.70 million, up 44.7% from its prior-year quarter. The company's EPS rose 45.7% year-over-year to $0.67.
The $0.60 consensus EPS estimate for the second quarter, ending June 30, 2022, represents 16% year-over-year growth. Analysts expect its revenue to increase 12.9% year-over-year to $146.31 million for the second quarter, ending June 30, 2022. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 12.2% in price year-to-date and 19.6% over the past nine months.
CTS' strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth and Quality and a B for Sentiment. Within the C-rated Technology - Electronics industry, it is ranked #4 of 48 stocks.
In total, we rate CTS on eight distinct levels. Beyond what we have stated above, we have given CTS grades for Stability, Value, and Momentum. Get all the CTS ratings here.
Arrow Electronics, Inc. (ARW)
Headquartered in Centennial, Colo., ARW offers products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Global Components and Global Enterprise Computing Solutions are its two operational segments.
ARW's sales increased 8.2% year-over-year to $9.07 million for the first quarter, ending April 2, 2022. Its operating income grew 70.4% from its year-ago value to $510.38 million, while its net income amounted to $364.75, up 76.8% from its prior-year quarter. The company's EPS rose 95.2% year-over-year to $5.31.
Analysts expect ARW's revenue to increase 9.7% year-over-year to $9.39 billion for the second quarter, ending June 30, 2022. The company's EPS is expected to grow 68.5% year-over-year to $5.63 in the second quarter, ending June 30, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The company' shares have surged 2% in price over the past three months.
It is no surprise that ARW has an overall A rating, which equates to Strong Buy in our POWR Ratings system. ARW has a B grade for Growth, Momentum, and Value. In the Technology - Electronics industry, it is ranked #3.
Click here to see the additional POWR Ratings for ARW (Quality, Stability, and Sentiment).
Brother Industries, Ltd. (BRTHY)
Headquartered in Nagoya, Japan, BRTHY manufactures and sells communications and printing equipment internationally. It has six operational segments Printing & Solutions, Personal & Home, Machinery, Network & Contents, Domino, and Others.
In its fiscal year ending March 31, 2022, BRTHY's revenue increased 12% year-over-year to ¥710.94 billion ($4.88 billion). Its operating profit grew 100.1% from its year-ago value to ¥85.50 billion ($5.49 billion), while its profit for the period amounted to ¥61.03 billion ($471.15 million), up 149% from its prior-year quarter. The company's EPS rose 149% year-over-year to ¥94.07.
Analysts expect BRTHY's revenue to increase 78.7% year-over-year to $5.74 billion for fiscal 2023.
BRTHY's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Stability and a B grade for Value and Quality. Within the Technology - Electronics industry, it is ranked #2.
In total, we rate BRTHY on eight distinct levels. Beyond what we have stated above, we have also given BRTHY grades for Growth, Sentiment, and Momentum. Get all the BRTHY ratings here.
Sanmina Corporation (SANM)
Headquartered in San Jose, Calif., SANM offers integrated manufacturing solutions, components, products and repair, logistics, and after-market services worldwide. It operates in two businesses–Integrated Manufacturing Solutions; and Components, Products, and Services.
For the first quarter, ending April 2, 2022, SANM's net sales increased 12.5% year-over-year to $1.911 million. Its operating income grew 27% from its year-ago value to $82.23 million, while its net income improved 13.1% from its prior-year quarter to $53.22 million. The company's EPS rose 18.6% year-over-year to $0.83.
The $1.11 consensus EPS estimate for the third quarter, ending June 30, 2022, represents a 12.5% improvement year-over-year. Analysts expect SANM's revenue to increase 13.4% year-over-year to $1.88 billion for the third quarter ending June 30, 2022. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 5.4% in price year-to-date and 18.2% over the past six months.
It is no surprise that SANM has an overall B rating, which equates to Buy in our POWR Ratings system. SANM has a B grade for Quality. In the Technology - Services industry, it is ranked #7.
Click here to see the additional POWR Ratings for SANM (Stability, Momentum, Growth, Value, and Sentiment).
JBL shares were trading at $61.57 per share on Thursday morning, up $0.94 (+1.55%). Year-to-date, JBL has declined -12.24%, versus a -13.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
5 Tech Stocks to Watch for June 2022 StockNews.com
