Electronics manufacturing services providers have been getting hurt lately as the companies that provide their financial life blood -- the Nortels, Lucents and Dells of the world -- have been cutting back their earnings forecasts.

Today, Merrill Lynch analyst Jerry Labowitz put more pressure on this sector and lowered his estimates on many of the bigger names. The ripple effect is quite clear, with earnings warnings from one arena spilling over into another and another.

"With just about every sector of technology experiencing a significant slowdown in demand, it has become increasingly difficult to believe the leading EMS companies can grow earnings by 30%," he wrote. "We are reducing our growth estimate to about 20%. We think that most of the EMS stocks currently reflect this notion."

So there. Growth of 20% is already priced in -- meaning that EMS manufacturers don't have much more room to rise. SCI Systems ( SCI), recently lowered to intermediate-term accumulate from buy, was hit again. Now it has been dropped to intermediate-term neutral from accumulate, reflecting the idea that EMS companies are correctly valued already.

Labowitz did say that at current levels, Celestica ( CLS - Get Report), C-MAC Industries Jabil Circuit ( JBL - Get Report), Sanmina ( SANM - Get Report) and Solectron "offer investors compelling technology investments over the next 12-18 months."

Okay, so let's check out the long-term view. It's worth noting that Labowitz was really talking about near-term issues and near-term catalysts. Basically, the EMS companies, which tend to perform pretty well in a slowdown as companies outsource manufacturing, will do well -- just not as well as expected and should not see any significant upside movement as a result.

Labowitz said that the future was still pretty good overall for the EMS companies, with current levels providing an attractive entry point for 2002, once a tech recovery occurs.

"The EMS industry remains one of the fastest growing sectors of technology," he wrote, "and slowing demand at OEM customers should result in more outsourcing, benefiting the EMS companies to a greater degree in the future."