The U.S. economy grew at a disappointing 1.8% rate in the first quarter. But some states enjoyed much faster economic growth — among those is my home state of Massachusetts, which saw its economy spike 4.2%. And that faster growth is based on its high-tech companies.
The best number in the federal government’s GDP report — the 11.6% rise in technology spending — benefits Massachusetts significantly. Local economists attribute the state’s 4.2% GDP growth to its leading companies getting an above-average share of that corporate investment.
Many Massachusetts-based companies likely received a good share of that spending. Here are three:
- EMC (NYSE:EMC), a maker of data storage hardware and software, that recently reported first-quarter earnings growth of 28% to $477 million on 18% revenue growth to $4.61 billion
- Thermo Fisher Scientific (NYSE:TMO), a designer and builder of scientific instruments, that reported first-quarter earnings growth of 8.5% to $252 million on 3.6% revenue growth to $2.7 billion
- Analog Devices (NYSE:ADI), a semiconductor manufacturer, that reported first-quarter earnings growth of 83% to $222 million on 21% revenue growth to $729 million
Using the trusty price-to-earnings-to-growth (PEG) ratio — a measure of how a stock’s market valuation compares to its growth prospects – let’s rank these possible plays on Massachusetts’ growth rate from lowest to highest PEG:
- EMC — 1.63. At a P/E of 31, its earnings are forecast to grow 19% to $1.42 a share in 2012
- Thermo Fisher — 1.92. Its P/E is 23 and its earnings are forecast to grow 12% to $4.55 a share in 2012
- Analog Devices — 2.23. Its P/E is 15.4 and its earnings are forecast to grow 6.9% to $2.96 a share in 2012
Of these three, EMC looks to be the most likely to profit from the ongoing trend of corporate technology spending. If the more expensive Analog Devices can continue to boost earnings at the rate it did in the most recent quarter, its stock price could also benefit.
Peter Cohan has no financial interest in the securities mentioned.
