Amphenol to Buy MTS Systems for $1.7 Billion; Target Price $157

Amphenol Corp, a leading manufacturer of high-speed specialty cables, said it will buy a global supplier of test systems and industrial position sensors MTS Systems for $58.50 per share in cash, or $1.7 billion, including debt and liabilities.

The deal is expected to close by the middle of next year.

On the other hand, Jefferies Financial Group analyst D. Kelley forecasts that the electronics maker will post earnings per share of $0.97 for Q1 2021, up from their prior estimate of $0.89. The New York-based investment bank forecasts Q4 2021 earnings at $1.19 EPS, FY2021 earnings at $4.37 EPS and FY2022 earnings at $4.81 EPS.

Amphenol’s shares closed 0.61% higher at $133.24 on Tuesday; the stock is up over 20% so far this year.

Amphenol Stock Price Forecast

Eight equity analysts forecast the average price in 12 months at $128.14 with a high forecast of $157.00 and a low forecast of $115.00. The average price target represents a -3.83% decrease from the last price of $133.24. All those eight analysts, four rated “Buy”, four rated “Hold” and none “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $105 with a high of $154 under a bull-case scenario and $83 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the electronic and fiber optic producer’s stock.

Several other analysts have also upgraded their stock outlook. Jefferies raised the stock price forecast to $157 from $138; Goldman Sachs increased the target price to $141 from $125; Baird upped the price objective to $128 from $127; Cowen and Company raised the target price to $130 from $115; UBS increased the price target to $138 from $133.

Analyst Comments

“We are Equal-weight Amphenol (APH). The company is a strong operator and grows in the mid-single digits organically and high single digits, including M&A. Amphenol’s share in connectors has increased to the low teens from 5% a decade ago,” noted Craig Hettenbach, equity analyst at Morgan Stanley.

“Furthermore, in the last 5 years, the company has built up a business in sensors (5% of sales), which should keep its growth engine humming. We view APH as an attractive compounder, although the near-term risk/reward looks balanced,” Hettenbach added.

Upside and Downside Risks

Upside Risks: 1) Greater revenue and EPS accretion from M&A. 2) Rebound in global auto production. 3) Increased growth in the $150 billion sensor market – highlighted by Morgan Stanley.

Downside Risks: 1) Any execution missteps on M&A. 2) A potential slowdown in demand in the data center and medical after outsized growth. 3) Competition in smartphones.