AKAnomics Case Study: 24Q3 APH Revenue Nowcast

Historical data suggests AKAnomics Nowcasting revenue estimates have a hit rate of 60-80% for being on the right side of consensus. So, we are happy to see a hit rate of 71% for 2024Q3 among the 23 companies we highlighted for revenue beat/miss as well as a 73% hit rate overall (among 131 companies we track). The ability to highlight potential disconnects from consensus comes from our ability to track granular global macro/industry data as soon as it is made available and translate that into implications for each company based on its business exposure to different global industries (our Nowcasting process). The ability to highlight potential disconnects is directly valuable to both discretionary and systematic hedge funds in their positioning.

Navigating data-driven methodologies can be challenging, and even further so for our “Quantamental” approach that merges fundamental assessment of each company with the relevant industry data, but we are happy to share our approach through a case study. We spotlight one of our estimates from 2024Q3 - Amphenol Corporation(APH) - where our revenue estimate came in very close to company reports, confirming the large beat relative to consensus. 

Company Overview: Amphenol Corporation (APH)

Amphenol designs, manufactures and markets electrical, electronic and fiber optic connectors, coaxial and flat-ribbon cable, and interconnect systems. The company serves diverse markets including automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, and mobile devices

2024Q3 Revenue Surprise Analysis 

Coming off strong performance in 24Q2, APH management guided to a 16-19% Year over Year revenue growth for 24Q3. Consensus consolidated around this range and settled at 18.8% growth for the quarter. As 2024Q3 progressed, our Nowcasting progress indicated significant improvements in the growth of relevant global industries that APH is exposed to, and the model estimated an 8.6% upwards revenue surprise. The company’s actual growth of 26.2% surprised to the upside by 7.4%, falling closely in line with our estimates. Furthermore, while we believe that it is important to flag beats/miss, it is even more important to do so early, before consensus moves. In APH’s case, our second data driven estimate for the quarter on 8/7/2024 indicated a potential 3.4% revenue surprise which steadily increased as more data rolled in throughout the quarter.

What gave us conviction? 

APH has exposures to Computer and Electronic Product Manufacturing industries globally as well as multiple subclassifications within. So, our approach is to follow these industries closely with global macro/industry data, and through historical data confirm that these relevant industry data have explanatory power. In 24Q3, the data suggested that North America Communications Equipment Manufacturing volumes increased significantly as well as leading orders data in Broadcasting and Wireless Communications Equipment manufacturing. Pricing in the North America region also increased but to a smaller extent than the aforementioned industries. The datasets adding to this assessment include Canada Orders data, US Industrial Production, and US Trade data among others. This contribution along with our complete data mosaic, tracking relevant industries to APH around the globe suggested a large revenue beat. Furthermore, our estimated assessment of the M&A activity relevant to APH contributed 11.3% to the revenue growth during the quarter, very close to the actual 11%. Our process of using thousands of macro variables to assess organic growth changes, and separately tracking inorganic growth (M&A, FX, etc.) leads to highly accurate outcomes that catch inflection points in company performance far earlier than the rest of the market.

This case exemplifies how macroeconomic and alternative data, when systematically analyzed and combined into predictive nowcasts, can provide a substantial informational edge to buy-side portfolio managers. By leveraging these data sources, we offer unparalleled insights that enhance decision-making processes and investment outcomes.