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February 18, 2013

TTM Technologies (TTMI), the largest American manufacturer of printed circuit boards (PCBs), saw a sharp drop in its stock price to $7.37 on Tuesday, January 15 after a story of a downgrade from an analyst at Stifel Nicolaus was circulated.

The company responded by updating its fourth quarter 2012 guidance on Thursday, coinciding with a presentation to investors that had already been scheduled. These results were equal to or better than the guidance TTMI gave when reporting Q3 (See TTMI Q3 2012) . The stock had recovered to $7.98 by market close today.

Q4 revenues are expected to be between $360 and $380 million, with GAAP earnings of $0.07 to $0.14 and non-GAAP earnings of $0.14 to $0.21.

In addition CEO Kenton Alder told investors that the high rate of capital expenditures of 2011 and 2012, which was required to meet high demand for the most advanced technology PCBs, would trend downward in 2013, from about $120 million to closer to $100 million. That will free up cash flow for other uses.

In Q3 2012 TTM's largest customers had been : Apple, Cisco, Ericsson, Huawei, and IBM, which together accounted for 31% of total sales. The largest customer, Apple, accounted for 14% of sales.

There has been much talk of a slowdown in demand for Apple products, which may have caused some analysts to assume TTMI would have a poor quarter, or poor growth in 2013. Mr. Alder pointed out that Apple is a relatively new customer for TTMI, and as such the PCBs made for Apple are for the iPad, not the iPhone. He said there had been no decrease of orders so far for iPad PCBs. He explained that as the newest PCB supplier to Apple, with the newest technology available, TTMI is gaining share from other suppliers of PCBs for Apple.

He also said TTMI makes the PCB for the Amazon Kindle Fire. Because it is a global company with a broad array of customers, TTMI is not particularly vulnerable to reduced demand from any particular client.

He also said that networking sector orders picked up in the quarter, but he was not yet ready to say this was a trend.

According to NASDAQ, of institutional (sell-side) analysts covering TTMI, 2 rate it as a Strong Buy, 1 as a Buy, and 4 as a hold.

Disclaimer: I own TTMI and will not trade the stock for 3 days after the publication of this report.

William P. Meyers

See also:

TTM Technologies investor relations
My main TTMI analyst conferences page.
Go to TTMI Q4 call notes to bookmark for February 5, 2013 analyst call

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