Plexus CorpPLXS reported better-than-expected third quarter fiscal 2016 results, marking the fourth straight quarter of earnings and revenue beat. Quarterly non GAAP earnings of 82 cents per share and revenues of $667.6 million easily beat the respective Zacks Consensus Estimate of 76 cents and $655.6 million. On a year-over-year basis, earnings grew 18.8% but revenues were down marginally. Nonetheless, the revenue figure was within the company's guided range of $640 million - $670 million.
Revenues from the Networking/Communications sector (23% of total revenue) plummeted 29.7% year over year to $156 million.
Healthcare/Life Sciences (31%) revenues were up 15% from the year-ago quarter to $207 million.
Industrial/Commercial (30%) revenues increased 14.8% year over year to $202 million.
Defense/Security/Aerospace segment (16%) revenues surged 12% on a year-over-year basis to $103 million.
During the quarter, the company won 46 programs for which it anticipates approximately $194 million in annualized revenues once production commences.
Region-wise, the company's revenues from Americas and Asia Pacific declined 1.7% and 6.8%, respectively, on a year-over-year basis. Nonetheless, Plexus' revenues from Europe, Middle East, and Africa regions increased nearly 21.1% over the prior-year quarter.
Plexus reported adjusted operating profit of $32.7 million in the quarter, up 14.3% year over year. Adjusted operating margin increased 60 basis points year over year to 4.9%.
Balance Sheet & Cash Flow
Plexus exited the quarter with cash & cash equivalents worth $433.7 million compared with $357.1 million as on fiscal 2015-end. The company had long-term debt and capital lease obligations of about $184.5 million compared with $259.3 million as of Oct 31, 2015.
The company generated $31.3 million in cash flow from operations in the quarter and used $7 million for capital expenditures, leaving $24.3 million as free cash flow.
For the fourth quarter of fiscal 2016, revenues are projected in the range of $655 million - $685 million. Non GAAP earnings are projected within 76 to 84 cents per share.
The company had earlier stated that its business can be impacted in the near term owing to the ongoing closure of its two lower-margin facilities.
PLEXUS CORP Price, Consensus and EPS Surprise
We believe new program wins along with global expansion will drive growth over the long term. Additionally, the consolidation of the company's production facilities in low-cost areas is expected to boost margins, going forward.
However, a mature electronic manufacturing services market and intense competition from the likes of Jabil Circuit JBL , Celestica Inc. CLS and Flextronics FLEX remain headwinds. Additionally, the company expects weakness in the Networking/Communications market to impact the business in the near term.
Currently, Plexus has a Zacks Rank #3 (Hold).
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