Plexus (PLXS) Opens New Manufacturing Unit in Mexico - Analyst Blog

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Plexus Corp. ( PLXS ) recently opened its new manufacturing facility in Guadalajara, Mexico. The company has invested nearabout $40 million for leasing 265,000 square foot of space in the Guadalajara Technology Park for this purpose.

The Guadalajara facility was constructed primarily as a substitute for the facility located in Juarez, Mexico, which was shut down earlier in 2014 for failure to secure sufficient business.

With the emergence of this new facility, Plexus now has 24 integrated facilities worldwide. Provided it runs at its full capacity, this facility can provide employment to about 740 highly-skilled personnel.

We believe that company's policy to shift its production from high-cost regions to low-cost regions will boost profitability in the long run.

Meanwhile, in another development, the company announced that its board has approved a new share repurchase program worth $30 million for fiscal 2015. We believe that this share repurchase program will boost shareholder confidence.

We believe that a sluggish demand environment will continue to hurt Plexus in the near term. Moreover, a mature electronic manufacturing services market and intense competition from the likes of Jabil Circuit ( JBL ) and Flextronics ( FLEX ) remain other headwinds for the company. Also, customer concentration remains a major concern for the company with 10 largest customers accounting for about 55% of revenues in 2013.

However, new program wins in the networking/communications, industrial/commercial and healthcare/life sciences sectors and global expansion will drive growth over the long term.

Moreover, the disengagement from Juniper ( JNPR ) is expected to improve the product mix, going forward. Additionally, 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 #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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