TTM Technologies, Inc. (TTMI) Shows Its Cyclical Side Again

TTM Technologies, Inc. (NASDAQ:TTMI) makes the circuit boards in your favorite electronics. The company dips into every market from smartphones and tablets, to enterprise-class networking gear, to military hardware. You need a high-quality board done fast? TTM is there. On an anecdotal level, you’d think a company like this should be swimming in money. I mean, take a look around you and count the electronic gadgets. This stuff is everywhere.

But somehow, TTM Technologies, Inc. (NASDAQ:TTMI) never got that memo. The company has resorted to growth by acquisition in recent years. Profit margins are both slim and unstable. The stock is a neurotic mess, and in most cases dead money even for very patient shareholders.

TTMI Revenue TTM data by YCharts.

The company reported first-quarter results last night. Sales increased 8% year-over-year to $325 million, led by strong revenue in the cell phone and networking markets but held back by soft sales to builders of computer systems. Non-GAAP earnings fell 43% to $0.13 per share. Adjusted net margins dwindled to 3.3%, down from 6.2% a year ago.

Wall Street analysts were looking for earnings around $0.09 per share on $320 million in sales, so these results crushed the Street’s estimates by a fair margin. But enthusiasm over the beat is tempered by a modest outlook for the coming quarter, where only the very top of management’s guidance ranges match the average analyst estimates.

On the earnings call, TTM Technologies, Inc. (NASDAQ:TTMI)’s leaders discussed signs of recovery in the networking market. Large customers there have started placing orders with longer lead times again, and that’s a trend break from several years of shortening order leads. CEO Kent Alder said that “there is overall a tone of more optimism” and “customers are getting a little more confident about the future.”

TTM Technologies, Inc. (NASDAQ:TTMI)’s largest networking customers include Juniper Networks, Inc. (NYSE:JNPR) and Cisco Systems, Inc. (NASDAQ:CSCO), which gives the board maker some unique perspective on the networking market. Both Cisco and Juniper could use a boost these days, as network upgrades have been slow on a global level over the last five years. Alder pointed to 4G LTE network installations as a potential driver of fresh growth in the second half of 2013 and onward.