SCI sees 1Q in line with forecasts

SCI Systems (NYSE: SCI) met First Call consensus estimates in the first quarter.

After market close Wednesday, the contract electronics manufacturer reported fiscal first quarter earnings of $40.7 million, or 56 cents per share. That figure was on target with the prediction generated by First Call's survey of 20 analysts for the quarter ended Sept. 26.

First quarter revenue increased to $1.66 billion from $1.57 billion in the year ago period, when SCI earned $30 million, or 45 cents per share. PC-related business generated about 42 percent of SCI's business, followed by networking and telecom equipment with 20 percent, 12 percent from set-top boxes, 10 percent from peripheral devices and about 7 percent from servers and workstations.

During a conference call with analysts, company executives said they current expect about $2 billion in second quarter revenue, with earnings of about 66 cents per share. Analyst consensus was predicting a profit of 63 cents per share for the December quarter.

As with other CEM companies, SCI expects to see more business from the network and communications equipment companies as that industry continues to use more subcontractors. Data and telecommunications hardware should make up 20 to 24 percent of SCI's second quarter business, while PC-related manufacturing falls to about 38 percent, said A. Eugene Sapp, president and CEO.

For the full fiscal 2000, SCI remains comfortable with a revenue estimate of $8.1 billion, Sapp told analysts. The company, which had previously forecast net income of $2.45 to $2.60 per share in 2000, now sees per-share profit in the mid $2.50s, Sapp said.

"Component pricing is a concern, as is tightening of availability," he said. "It's impossible to predict where this is headed, but we believe we will be ok for the most part, except in satisfying unanticipated increases in demand, which we know we will have some of."

So far, SCI hasn't seen any effects from Taiwan's earthquake last month, except for rising memory chip prices, Sapp said.

Shares of SCI fell 1 1/2 to 40 3/16 in Wednesday's regular trading prior to the earnings report. Of 21 Wall Street firms surveyed by Zack's Investment Research, 11 recommend SCI as a "strong buy", nine have the equivalent of "moderate buy" ratings on the stock, and one maintains a "hold" advisory.>