Plexus Corp. (
reported earnings of 67 cents per share in the fourth quarter of
fiscal 2013, in line with the Zacks Consensus Estimate. Earnings
(excluding discrete tax benefit) climbed 1.0% on a year-over-year
basis but declined 1.3% sequentially.
FLEXTRONIC INTL (FLEX): Free Stock Analysis
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Revenues declined 4.5% year over year and 0.7% sequentially to
$567.7 million, almost in line with the Zacks Consensus Estimate.
Revenues came within management's guided range of $545.0 million
to $575.0 million. The decline in revenues was primarily due to
weak end-market demand and negative impact of
Revenues from Networking/Communications sector (38.0% of
revenues) decreased 13.6% year over year and 9.6% on a sequential
basis to $197.0 million.
Healthcare/Life Sciences (25.0% of revenues) revenues increased
15.2% from the year-ago quarter and 12.0% sequentially to $159.0
million. The sequential increase was due to better-than-expected
performance from its top customers.
Industrial/Commercial sector (24.0% of total revenue) plunged
10.1% on a year-over-year basis but increased 3.6% sequentially
to $143.0 million.
Revenues from Defense/Security/Aerospace sector (13.0% of total
revenue) decreased 1.4% year over year and 6.8% sequentially to
During the quarter, Plexus won 34 new programs in the
manufacturing solutions group, which is expected to generate
approximately $155.0 million in annualized revenues once
Gross margin expanded 10 basis points (bps) from the year-ago
quarter but declined 10 bps from the previous quarter to 9.6%.
Gross margin was positively affected by Plexus's efforts to
improve operating performance that includes shifting of
production to low cost areas. Better customer mix and robust
performance from Engineering Solutions organization also led to
the year-over year expansion. However, lower revenue base
resulted in the sequential contraction.
Selling and administrative (S&A) expense as a percentage of
revenues remained flat year over year but declined 40 bps from
the previous quarter to 4.9%, reflecting stringent cost control.
As a result, operating margin expanded 10 bps from the year-ago
quarter and 30 bps from the previous quarter to 4.7%.
Net income margin improved 10 bps from the year-ago quarter but
remained flat sequentially at 4.1%.
Balance Sheet & Cash Flow
Plexus exited the fourth quarter of fiscal 2013 with $341.9
million in cash and investments versus $285.6 million in the
third quarter of fiscal 2013. Long-term debt and capital lease
obligations (including the current portion) amounted to $261.3
Cash flow from operations was $92.0 million in the quarter while
free cash flow amounted to $68.0 million. During the quarter,
Plexus repurchased shares worth $13.8 million at an average cost
of $33.60 per share.
For the first quarter of fiscal 2014, revenues are projected in
the range of $520.0 million to $550.0 million. Management expects
revenues to decline by $42 million sequentially due to the
disengagement from Juniper.
Moreover, management expects revenues to be down in high teens
range for Network/communication segment. Excluding the effect of
Juniper's disengagement, revenues from the segment are expected
to increase in the low-single digit range in the upcoming
Healthcare/Life Sciences revenues are expected to remain flat on
a sequential basis. Industrial/Commercial revenues are expected
to decline by mid-single-digit percentage points sequentially.
Revenues from Defense/Security/Aerospace are expected to increase
in the high-single digit percentage range sequentially.
Earnings are projected to be between 57 cents and 63 cents per
share, excluding any restructuring charges and including
approximately 8 cents per share in stock-based compensation
Management expects gross margin in the range of 9.6% to 9.8%
while operating margin is expected in the range of 4.6% to 4.8%.
The company expects its selling, general and administrative
(SG&A) expenses to be between $26.0 million and $27.0
For fiscal 2014, management expects to spend $75.0 million on
We believe that a sluggish demand environment will continue to
hurt Plexus in the near term. Moreover, a matured electronic
manufacturing services market and intense competition from the
Jabil Circuit (
remain other long-term headwinds for Plexus.
However, we believe that new business opportunities, particularly
in the industrial/commercial and healthcare/life sciences sectors
and global expansion will drive growth over the long term.
Moreover, the disengagement from Juniper is expected to improve
the product mix, going forward. Moreover, the consolidation of
the company's production facilities in low-cost areas is expected
to boost margins going forward.
Currently, Plexus has a Zacks Rank #1 (Strong Buy).