Electronic Manufacturing Services provider
Plexus Corp. (
PLXS
)
reported second quarter earnings of 56 cents per share, which
surpassed the Zacks Consensus Estimate by a couple of cents and was
within management's guided range of 51 cents to 58 cents per share.
However, on a year-over-year basis earnings declined 5.0%,
primarily due to higher interest expense and tax rate in the
quarter.
Quarter Details
Total revenue in the quarter decreased 0.9% on a year-over-year
basis to $573.5 million, but was within management's guided range
of $550.0 million to $580.0 million and also surpassed the Zacks
Consensus Estimate of $566.0 million.
The year-over-year decline in revenue was primarily attributed
to continued volatility in the Networking/Communications segment.
The segment reported revenue of $210.0 million, down 21.3% year
over year in the quarter. Networking/Communications contributed
37.0% to the total revenue in the reported quarter compared with
46.0% in the year-ago quarter.
Industrial/Commercial (33.0% of the total revenue) increased
53.7% year over year to $189.0 million. Medical (20.0% of revenues)
decreased 11.0% year over year to $114.0 million. Defense/
Security/Aerospace (10% of the total revenue) improved 20.0% year
over year to $60.0 million.
During the quarter, Plexus won 28 new programs in the
manufacturing solutions group and the company expects to generate
approximately $316.0 million in annualized revenue once production
commences.
Top 10 customers of the company accounted for 63.0% of the total
revenue.
Juniper Networks Inc. (
JNPR
)
and
The Coca-Cola Co. (
KO
)
were the only customers accounting for 10.0% or more of revenues
during the quarter.
Gross profit dipped 1.5% from the year-ago quarter to $54.6
million. Gross margin for the quarter stood at 9.5% compared with
the year-ago level of 9.8%.
Operating profit slipped 2.4% from the prior-year quarter to
$25.8 million, while operating margin stood at 4.5% versus 4.6% in
the year-ago quarter. Operating profit was negatively impacted by a
weaker gross profit in the quarter.
Net income declined 16.4% year over year to $20.0 million. The
year-over-year decline was primarily attributable to higher net
interest expense (up 93.1% year over year) and taxes. Net margin
was 3.5% in the quarter, down from 4.2% reported in the year-ago
quarter.
Balance Sheet and Cash Flow
Plexus exited the quarter with $257.8 million in cash and
investments versus $248.3 million in the previous quarter.
Long-term debt and capital lease obligations (including the current
portion) amounted to $279.1 million versus $283.4 million in the
previous quarter.
Third Quarter Guidance
For the forthcoming third quarter 2012, total revenue is
projected in the range of $590.0 million to $620.0 million. Plexus
expects earnings to be between 60 cents and 66 cents per share,
excluding any restructuring charges and including approximately 8
cents per share in stock-based compensation expenses. Currently, we
expect Plexus to earn 62 cents in the third quarter.
Our Recommendation
We believe that stabilizing end markets, new business
opportunities, particularly in the industrial/commercial and
medical sector and global expansion will drive growth over the long
term. We also believe that the gradual improvement in the U.S.
market will boost Plexus' top line going forward. However, intense
competition, continued component challenges and supply chain
constraints remain major concerns for Plexus over the long
term.
Thus, we have Neutral recommendation on Plexus over the long
term (6-12 months). Currently, Plexus has a Zacks #3 Rank, which
translates into a Hold rating over the short term.
JUNIPER NETWRKS (
JNPR
): Free Stock Analysis Report
COCA COLA CO (
KO
): Free Stock Analysis Report
PLEXUS CORP (
PLXS
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research