CANON INC. ADRs $41 - New York symbol CAJ

CANON INC. ADRs $41 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.2 billion; Market cap: $49.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.canon.com) gets 49% of its revenue by making printers; consumer products, such as cameras and inkjet printers (40% of revenue); and industrial products, such as chips and other components for TV sets, medical equipment and mobile devices (11%).

In the three months ended March 31, 2012, Canon’s earnings rose 12.3%, to $750.5 million from $668.2 million a year earlier. Earnings per ADR rose 16.7%, to $0.63 from $0.54, on fewer ADRs outstanding (each ADR represents one common share).

The gains were largely due to lower costs. For example, Canon is using more robots to assemble its products.

Canon’s overall sales in the quarter were unchanged at $10.1 billion. That’s largely because sales of office products fell 7.4%, as the current economic uncertainty is prompting businesses to hold off on buying office equipment. However, industrial equipment sales rose 57.0% on strong demand for parts used in smartphones. As well, Canon’s new cameras continue to sell well. That increased consumer product sales by 6.2%.

Canon spent 8.7% of its sales on research in the latest quarter. Its strong balance sheet will let it keep investing in new products: it holds cash of $9.5 billion, or $7.13 per ADR, and its debt is just $39.5 million.

The company will probably earn $2.78 per ADR in 2012. The stock trades at 14.7 times that figure. The $1.51 dividend yields 3.7%.

Canon is a buy.

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