J.P. Morgan Bullish On Contract Mfg; Wary On Component Cos

J.P. Morgan analyst Steven O’Brien this morning picked up coverage of five companies in the electronics supply chain, taking a bullish position on the contract electronics manufacturing sector,� with a more cautious view of electronic components.

Here’s a rundown on his new calls:

• Jabil Circuit (JBL): Overweight rating, $17 target.
• Flextronics (FLEX): Overweight rating, $7 target.
• Amphenol (APH): Neutral rating, $43 target.
• Molex (MOLX): Underweight rating, $17 target.
• Tyco Electronics (TEL): Underweight rating, $22.50 target.

“We expect healthy, albeit moderating, EMS [electronic manufacturing services] revenue growth driven by increasing exposure to end markets with low levels of outsourced manufacturing penetration,” he writes in a research note. “We also believe EMS margins should be sustainable due to an improving focus on both higher-end products and more profitable industries.”

Meanwhile, he says component companies� margin improvement “could slow dramatically even in a sustained economic recovery,” asserting that “these companies� rapid margin turnarounds may have been driven by an untenable combination of cost reductions in the face of whipsawing demand.”

In today’s trading:

• JBL is up 8 cents, to $13.58.
• FLEX up 7 cents, at $5.95.

• APH is up 62 cents, or 1.5%, to $40.90.
• MOLX is down 5 cents, at $18.20.
  

• TYC is� up 14 cents, at $37.04.