Flex Ltd FLEX reported third-quarter fiscal 2024 adjusted earnings per share (EPS) of 71 cents, which beat the Zacks Consensus Estimate by 14.5%. The bottom line grew 14.5% year over year.
Revenues decreased 8% year over year to $7.1 billion. However, it beat the consensus mark by 5.5%. The downtick was caused by weakness across the Agility and Reliability Solutions segments.
Revenues for Core Flex (which represents Flex’s total revenues excluding Flex’s 51.47% economic interest in Nextracker) was $6.4 billion, declining 11.5% year over year.
Flex Ltd. Price, Consensus and EPS Surprise
Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote
Segment Details
The Flex Reliability Solutions Group comprises Health Solutions, Automotive and Industrial businesses. Revenues decreased 8% year over year to $3 billion. The downtick was caused by macro-driven weakness in commercial industrial solutions and continued headwinds in residential solar, offset by solid demand in auto and medical devices.
The Flex Agility Solutions Group comprises Communications & Enterprise Compute and Lifestyle and Consumer Devices businesses. Revenues were down 14% year over year to $3.5 billion.
The Nextracker Group’s revenues rose 38% year over year to $0.7 billion. On Jan 2, 2024, the company spun off all its remaining interest in Nextracker to its shareholders (on a pro-rata basis). Overall, for each Flex ordinary share held as of the record date of Dec 29, 2023, Flex shareholders received roughly 0.17 shares of Nextracker common stock.
Flex's consolidated financial statements will list Nextracker's historical results as well as some of the assets and liabilities from the spin-off as discontinued operations starting with the company's fourth quarter ending Mar 31, 2024.
Operating Details
Non-GAAP gross margin increased 230 basis points (bps) on a year-over-year basis to 10% in the reported quarter.
Non-GAAP selling, general & administrative expenses, as a percentage of revenues, were 3.3%, which increased 40 bps from the year-ago period.
Non-GAAP operating margin expanded 190 bps year over year to 6.7%.
Adjusted operating margins of the Flex Reliability Solutions Group was 5.4%, up 100 bps year over year. The Nextracker Group’s adjusted operating margin was 22.8%, up 1,110 bps year over year. The Flex Agility Solutions Group’s adjusted operating margin was 5%, up 50 bps.
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash & cash equivalents totaled $2.76 billion compared with $2.9 billion as of Sep 29, 2023.
As of Dec 31, 2023, total debt (net of current portion) was $3.43 billion compared with $3.41 billion as of Sep 29, 2023.
In third-quarter fiscal 2024, the company generated cash flow of $284 million from operating activities and an adjusted free cash flow of $156 million.
In the quarter under review, FLEX repurchased shares worth $275 million.
Guidance
For third-quarter fiscal 2024, Core Flex (excluding Nextracker) revenues are expected to be between $5.8 billion and $6.4 billion. Management expects adjusted EPS in the range of 50-60 cents. Adjusted operating income is projected to be between $305 million and $355 million.
For fiscal 2024, Flex expects total flex revenues (including Nextracker contributions for Q1 through Q3) between $27.7 billion and $28.3 billion. It anticipates adjusted EPS in the range of $2.47-$2.57. Adjusted operating margin is projected to be in the range of 5.7-5.9%.
For fiscal 2024, Flex expects core flex revenues between $26 billion and $26.6 billion. It anticipates adjusted EPS in the range of $2.07-$2.17. Adjusted operating margin is projected to be in the range of 4.8-4.9%.
Zacks Rank & Stocks to Consider
Flex currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the broader technology space are Itron ITRI, NETGEAR NTGR and Watts Water Technologies WTS. NETGEAR and Itron sport a Zacks Rank #1 (Strong Buy), while Watts Water Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Itron’s 2023 EPS has inched up 3.2% in the past 60 days to $2.88. ITRI’s long-term earnings growth rate is 23%.
Itron’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 289.3%. Shares of ITRI have gained 33.1% in the past year.
The Zacks Consensus Estimate for 2023 is pegged at a loss of 9 cents per share for NETGEAR, which remained unchanged in the past 30 days.
NTGR’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters while missing once. The average surprise was 127.5%. Shares of NTGR have lost 29.5% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 3.9% in the past 60 days to $8.08.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11.8%. Shares of WTS have soared 23.2% in the past year.
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