Market Makes Strong Showing, Especially Across Retail Sector
WALL STREET WEST
The relatively strong performance of local public companies in the fourth quarter of 2003 has given market watchers further evidence of a solid start to the new year.
Many large cap companies appear fully priced because of the massive stock market run-up, said Ed Wedbush, president of Wedbush Morgan Securities, who favors mid- to small-cap stocks. He also is focused on certain sectors, including telecommunications, oil services, semiconductors, furniture and engineering firms as well as companies with business in China.
“I think the first quarter will be strong, though there will always be some exceptions,” he said.
The outlook appears especially solid on the retail front.
Jeffrey Van Sinderen, a retail analyst at B. Riley & Co. sees plenty of improvement in the sector as a whole with some local chains such as Hot Topic Inc. of City of Industry and Pacific Sunwear of California Inc. of Anaheim performing ahead of the pack.
“Both of these retailers have been riding strong results for the last few years and they continue to do well,” he said.
K Swiss Inc. of Westlake Village and Vans Inc. of Santa Fe Springs are also doing well and represent the overall sector. “In general, the retail segment is a bit improved from last year though most are not going like gangbusters.”
Assessing the Dollar
The weak dollar could mean strong sales growth for companies when it comes time to report first-quarter results.
“A strong euro usually ends up boosting sales there,” said Barry Liden, spokesman for Irvine-based heart valve maker Edwards Lifesciences Corp. “Our products sold in Europe are made outside Europe mostly in the U.S.”
Edwards, which counts on Europe for 22 percent of its $860 million in annual sales, is one of several regional companies to take advantage of the declining dollar because shipments cost less for European buyers.
And it’s not just Europe. Companies are seeing sales buoyed around the world.
“It’s helping our business,” said Greg Waller, chief financial officer at Orange dental products maker Sybron Dental Specialties Inc. “We saw worldwide revenue for the year ended Sept. 30 increase 4 percent to 5 percent over the previous year just because of the weaker dollar alone.”
The weaker dollar has drawbacks. Stocks and debt of companies based here will be pricier for global investors. And dollars won’t go as far for companies investing in Europe and elsewhere, while profits earned in other currencies will take a hit when converted to dollars.
But for Universal Electronics Inc., a Cypress-based maker of remote controls, the costs of a weak dollar and strong euro haven’t outweighed the benefits.
“The appreciation of the euro compared to the dollar has positively impacted Universal Electronics’ sales and, to a lesser degree, negatively impacted its costs,” said Bernie Pitz, Universal’s chief financial officer. “If there is an additional rise in the euro relative to the dollar, management expects the same impact.”
Orange County Business Journal
TTM Technologies Inc. is on a roll.
Shares of the Santa Ana circuit board maker have surged more than 350 percent in the past year, giving the company a $700 million market value.
TTM moved from Redmond, Wash., to Orange County last year after 2002’s buy of Advanced Circuits Inc., a unit of Honeywell International Inc. that had a plant in Santa Ana.
The company’s forte: quickly designing and turning out circuit boards for customers including Cisco Systems Inc., Apple Computer Inc. and Broadcom Corp.
Last year, TTM’s sales more than doubled to $180 million, thanks in part to the Advanced Circuits buy and the tech sector’s turnaround.
Net income for the year was $7.4 million, up from $1.6 million in 2002.
Rival DDi Corp. of Anaheim has emerged from bankruptcy reorganization with a big bounce. As of last week, the company counted a market value of more than $1 billion, up from $30 million in mid-2002.
TTM’s other rivals include Multi-Fineline Electronix Inc. of Anaheim and big contract electronics makers such as Sanmina/SCI Corp. and Flextronics International Ltd.
The circuit board sector was hit hard by the tech downturn and still faces a surplus of production capacity. Quick-turnaround players such as TTM and DDi are benefiting as gear makers seek to meet rising demand without committing to longer-term production contracts.
Orange County Business Journal