Flextronics International Ltd
) is set to release its fiscal second quarter 2013 results after
the closing bell on October 18, 2012. Flextronics has posted an
average earnings surprise of 3.18% over the past four quarters. We
don't expect a major change in the earnings trend pattern for the
Prior Quarter Recap
Flextronics' first quarter revenue was down 20% year over year
to $5.99 billion and missed the Zacks Consensus Estimate of $6.07
billion. The year-over-year decline was primarily due to transition
of business model toward low-volume high-margin business. The
reported revenue was slightly above the lower end of management's
guidance range of $5.9 billion-$6.3 billion.
However, the bottom line for the company expanded 5% on a
year-over-year basis to 21 cents driven by modest margin
expansions. Reported earnings also beat the Zacks Consensus
Estimate by a penny.
For the forthcoming quarter, management expects earnings per
share in the range of 21 cents to 25 cents. Total revenue is
expected in the range of $5.9 billion to $6.3 billion. The Zacks
Consensus Revenue Estimate for the second quarter is $6.19
Estimate Revision Trend
In the last 30 days, none of the six analysts covering the stock
revised their estimates for the second quarter. Thus, the Zacks
Consensus Estimate for the quarter remained at 22 cents per
Analysts covering the stock expect the company to report an
in-line quarter. Analysts are positive on the margin expansions and
expect the phenomenon to continue in the near term. Moreover,
strong bookings would also act as a positive catalyst for
Flextronics. However, analysts believe that the overall sluggish
macroeconomic environment may hamper the revenue growth.
We believe that demand is stabilizing in the traditional sectors
(consumer electronics, computing, networking and communications)
and the company is experiencing strong demand from the emerging
markets (automotive, medical, industrial). Further, the portfolio
realignment will likely boost profitability over the long term.
However, we believe that Flextronics will face significant
headwinds over the next couple of quarters due to macroeconomic
concerns, weak end-market demand and continuing supply chain
related problems. Increasing competition from
Jabil Circuit Inc.
) remains a concern. Moreover, the portfolio realignment is also
expected to hurt Flextronics' top-line growth in the near term.
We have a Neutral recommendation on Flextronics over the long
term. Currently, Flextronics has a Zacks #4 Rank, which implies a
short-term 'Sell' rating (for the next 1-3 months).
FLEXTRONIC INTL (FLEX): Free Stock Analysis
JABIL CIRCUIT (JBL): Free Stock Analysis Report
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