Plexus Corp. (PLXS) reported earnings of 52 cents in the second
quarter of 2013, which beat the Zacks Consensus Estimate by a
penny.FLEXTRONIC INTL (FLEX): Free Stock Analysis
ReportJABIL CIRCUIT (JBL): Free Stock Analysis ReportJUNIPER NETWRKS (JNPR): Free Stock Analysis
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Revenues declined 2.7% year over year but increased 5.1%
sequentially to $557.8 million, slightly ahead of the Zacks
Consensus Estimate. Revenues were slightly ahead of the low end of
management's guided range of $550.0 million to $580.0
Revenues from Networking/Communications (38.0% of total revenue)
climbed 1.4% year over year and 7.0% sequentially to $213.0
million. Although revenues increased in the quarter, growth fell
short of management's expectation as Plexus customers continued to
face sluggish end-market demand during the quarter.
Healthcare/Life Sciences (23.0% of total revenue) surged 13.2%
from the year-ago quarter but declined 3.0% sequentially to $129.0
The Industrial/Commercial sector (25.0% of total revenue) plunged
25.9% on a year-over-year basis but increased 6.9% from the
previous quarter to $140.0 million.
Revenues from the Defense/Security/Aerospace sector (14.0% of
total revenue) soared 26.7% year over year and 11.8% on a
sequential basis to $76.0 million.
During the quarter, Plexus won 33 new programs in the
manufacturing solutions group, which is expected to generate
approximately $143.0 million in annualized revenues once production
Gross profit decreased 4.8% from the year-ago quarter but climbed
1.7% from the previous quarter to $52.0 million. Gross margin
declined 30 basis points ("bps") sequentially and 20 bps from the
year-ago quarter to 9.3%.
Selling and administrative (S&A) expense remained flat on a
year-over-year basis but decreased 2.8% quarter over quarter to
$28.8 million, reflecting stringent cost control.
Operating income decreased 10.0% year over year but increased 7.9%
sequentially to $23.2 million. The year-over-year decline was
primarily due to lower gross margin base. Operating margin
contracted 30 bps from the year-ago quarter to 4.2%. However, on a
sequential basis operating margin improved 20 bps due to lower
Net income decreased 9.9% year over year but jumped 8.2%
sequentially to $18.0 million. As a percentage of revenues, net
margin contracted 30 bps on a year-over-year basis but improved 10
bps from the previous quarter. Earnings decreased 7.4% from the
year-ago quarter but increased 10% from the previous quarter.
Balance Sheet & Cash Flow
Plexus exited the second quarter of 2013 with $276.5 million in
cash and investments versus $274.2 million in the first quarter of
2013. Long-term debt and capital lease obligations (including the
current portion) amounted to $261.7 million versus $269.8 million
in the previous quarter.
Cash flow from operations was $54.0 million in the quarter
compared with $9.0 million in the previous quarter. Free cash flow
was $27.0 million compared with ($17.0) million in the first
quarter of 2013.
Return on invested capital (ROIC) was 12.7% at the end of the
second quarter compared with 12.6% at the end of first quarter of
For the third quarter of 2013, total revenue is projected in the
range of $550.0 million to $580.0 million. Earnings are projected
to be between 55 cents and 62 cents per share, excluding
restructuring charges but including approximately 8 cents per share
in stock-based compensation expenses.
As announced earlier, Juniper's (JNPR) disengagement is expected to be completed by the
end of third quarter of 2013.
We believe that sluggish demand environment will continue to hurt
Plexus in the near term. Moreover, a matured electronic
manufacturing services ("EMS") market and intense competition from
the likes of Jabil (JBL)
and Flextronics (FLEX) remain the other major headwinds for Plexus over
the long term.
However, we believe that new business opportunities, particularly
in the industrial/commercial and medical sector and global
expansion will drive growth over the long term. Moreover, the
disengagement with Juniper is expected to improve product mix going
Currently, Plexus has a Zacks Rank #3 (Hold).