Flextronics International Ltd. (
reported fourth quarter earnings of 12 cents per share that
matched the Zacks Consensus Estimate but declined from 22 cents
reported in the year-ago quarter.
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Revenues declined 17.0% from the year-ago quarter to $5.30
billion, slightly short of the Zacks Consensus Estimate of $5.45
billion. The year-over-year decline in revenues was due to the
winding down of the assembly business with
Research In Motion (
. Revenues were in line with the higher end of management's
guided range of $5.0 billion to $5.3 billion.
The Integrated Network solutions segment, which was the largest
revenue contributor (47.0% of revenues) in the quarter, declined
12% from the year-ago quarter to $2.47 billion; primarily due to
a weak demand trend in the telecom and networking sector and
High velocity solutions (22.0% of revenues) segment revenues
declined a massive 41.0% from the year-ago quarter to $1.16
billion, reflecting the winding down of the assembly business
with RIM, weak demand trends in computing, consumer and mobile
communications and normal seasonality.
Revenues from the Industrial and Emerging Industries (17.0% of
revenues) declined 4.0% year over year to $895.0 million. High
Reliability Solutions revenues (14.0% of revenues) improved 20.0%
from the year-ago quarter to $776.0 million, primarily
attributable to continued strong performance of the automotive
Gross margins improved 30 basis points ("bps") on a
year-over-year basis to 5.6%, reflecting business transition to
the low-volume high-margin revenue model.
Selling, general & administrative (SG&A) expense
increased 80 bps to 4.1% from 3.3% in the year-ago quarter. As a
result, operating margin contracted 70 bps to 1.8% in the fourth
Net income as a percentage of revenues was 1.5% compared with
2.5% in the year-ago quarter.
Flextronics exited the quarter with cash and cash equivalents of
$1.59 billion compared with $1.71 billion at the end of the
previous quarter. Total debt was $2.07 billion versus $2.09
billion in the previous quarter.
For the first quarter, management expects adjusted earnings in
the range of 12 cents to 16 cents per share. Total revenue is
expected in the range of $5.3 billion to $5.6 billion.
Flextronics forecasts Integrated Network solutions and High
Reliability Solutions revenues to remain flat sequentially.
Industrial and Emerging Industries are expected to grow at a low
single-digit growth rate as new program ramps up in first
High Velocity Solutions is also expected to rise in low
double-digits due to partial quarter contribution from the
acquisition of Google's (GOOG) Motorola manufacturing unit in
Brazil and Tianjin China.
Flextronics has undertaken a number of new initiatives to enhance
its competitive edge, which includes divestiture of non-core
assets and deployment of new technologies. New programs are
expected to boost production volumes by early fiscal 2014,
although profitability is expected to remain weak due to
In this regard, we believe that strategic acquisitions and strong
new bookings will also drive top-line growth over the long term.
However, macroeconomic concerns and weak end-market demands are
major concerns in the near term.
Moreover, the portfolio realignment is also expected to hurt
Flextronics' top-line growth in the near term. Further,
increasing competition from
Jabil Circuit Inc. (
Plexus Corp (
remains a concern going forward.
Currently Flextronics has a Zacks Rank #3 (Hold).