Tuesday, November 4, 2008

TTM Technologies (TTMI) Okay Despite Economy

TTM Technologies (TTMI) reported $169.0 in revenues for the third quarter of 2008. It is interesting to see which companies are being impacted by the economic turmoil. Many technology company management teams, earlier in the year, took the line that they enabled their customers to save money, and so could grow even during a recession. Q3 earnings reports tests that theory, and in some cases it has turned out to be right, as with Akamai, and in others wrong, as with Rackable Systems.

TTM Technologies makes printed circuit boards (PCBs). These used to be pretty mundane, essentially pieces of plastic with holes drilled in it to receive component wires, with copper foil lines running between the electronics. But today's high-end components are so small and require so many connections that PCBs themselves have become high technology. Holes must be precision drilled with lasers, and the boards tend to many alternating conductive and non-conductive layers.

Usually truly mass production of PCBs is done in Taiwan, China, or some other low-cost Asian nation. TTM Technologies can do prototyping of boards before the mass production run, and runs of boards that are at the cutting edge of technology. Examples are networking equipment, electronic testing equipment, medical devices, and aerospace devices.

TTM's revenues were down 3% from Q2, but up 4% from Q3 2007. Probably they were impacted by the economy and would have shown sequential growth in a normal environment. GAAP net income was $9.5 million, just above flat compared to Q2 but up 15% from the year-earlier quarter.

TTM gets better profit margins on its high-end products than on lower-end and mass production products. During the quarter the mix of products shifted to the high-end, so they were able to do pretty well.

Despite that guidance for Q4 was down to $156 million to $164 million in revenues, with EPS between $0.14 and $0.19. If there is a drastic reduction in economic activity, TTM will feel it.

For a full report on TTMI's Q3 see my TTM analyst conference summary for Q3 2008.

On a cash basis results were even better, with EBITDA (earnings before interest, taxes, depreciation and amortization) of $22.2 million.

TTM Technologies ended the quarter with $135 million in cash, enough to get through a downturn. It also has been looking to acquire an Asian PCB manufacturer to do high-volume, low cost runs, so cash could go to that if the right match is found.

TTMI stock is trading today at around $6.80 per share, giving it a market capitalization of about $290 million. Using GAAP net income for the quarter, it has a current P/E ratio of under 8. In any stock market but today's that would be a tremendous buy.

I own TTMI stock, which I picked up earlier this year. You can find more information at my main TTMI page.

Like all stocks TTMI carries risks and uncertainties, so keep diversified!

More data:

TTM Technologies
PCBs (printed circuit boards) at Wikipedia

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