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Flex (FLEX) Down 6.8% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Flex (FLEX - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Flex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Flex Q1 Earnings Beat Estimates, Revenues Fall Y/Y
Flex reported first-quarter fiscal 2021 adjusted earnings of 23 cents per share that beat the Zacks Consensus Estimate by 27.8%. However, the figure decreased 14.8% year over year.
Revenues declined 16.6% year over year to $5.15 billion but beat the consensus mark by 2.9%. The year-over-year decline was primarily due to automotive shutdowns and slow ramp of projects.
Most of Flex’s North American and European auto-production sites remained closed in the reported quarter.
Segment Details
Beginning fiscal first quarter, the company started reporting in two segments - Flex Agility Solutions Group and Flex Reliability Solutions Group.
Flex Agility Solutions Group comprises Health Solutions, Automotive and Industrial businesses. Revenues declined 1% year over year to $2.24 billion.
Markedly, the company has produced more than 20 million masks to date at seven locations across the globe. Moreover, all of Flex’s production sites around the globe are up and running and the company witnessed significant improvement in supply chain, which was massively disrupted by the coronavirus outbreak.
Flex’s Health Solutions business benefited from strong demand for ventilators, testing equipment, oxygen concentrators, fusion pumps, patient monitors and ICU beds. The company also saw continued strength in industrial end-market such as power products.
Flex Reliability Solutions Group comprises Communications & Enterprise Compute or CEC, Lifestyle and Consumer Devices businesses. Revenues plunged 25% year over year to $2.91 billion.
CEC benefited from strong demand for networking and compute equipment to support the increased workload from work-and-learn from home. However, sluggish Lifestyle and Consumer Devices businesses negatively impacted the segment’s growth in the quarter under review.
Operating Details
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis and came in at 6.2% in the reported quarter.
Non-GAAP selling, general & administrative (SG&A) expenses as a percentage of revenues declined 20 bps year over year to 3%.
Non-GAAP operating margin contracted 20 bps on a year-over-year basis to 3.2%.
Flex Agility Solutions Group operating margin was 5.1%. Flex Reliability Solutions Group operating margin was 2.5%
Balance Sheet & Cash Flow
As of Jun 30, 2020, cash & cash equivalents were $1.94 billion, up from $1.92 billion as of Mar 31, 2020.
Total debt was $3.56 billion as of Jun 30, up from $2.84 billion as of Mar 31.
Net cash used by operating activities was $629.4 million during the reported quarter compared with $656.9 million used in operations in the year-ago quarter and $50.9 million used in operations in the previous quarter.
Free cash outflow was $74 million in the reported quarter compared with free cash flow of $114 million in the year-ago quarter and $134 million in the previous quarter.
Guidance
For second quarter of fiscal 2021, Flex expects revenues between $5.4 billion and $5.7 billion. Adjusted operating income is expected between $180 million and $220 million.
Adjusted earnings are expected in the range of 25-31 cents per share.
Flex plans to phase out certain non-core functions and streamline organizational structure. The company intends to focus on key markets where it has competitive leverage and domain expertise. Charges related to these reorganizations are expected to be $100 million for the rest of fiscal 2021. Flex expects to save $60 million in fiscal 2022 related to these activities.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -69.23% due to these changes.
VGM Scores
Currently, Flex has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Flex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Flex (FLEX) Down 6.8% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Flex (FLEX - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Flex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Flex Q1 Earnings Beat Estimates, Revenues Fall Y/Y
Flex reported first-quarter fiscal 2021 adjusted earnings of 23 cents per share that beat the Zacks Consensus Estimate by 27.8%. However, the figure decreased 14.8% year over year.
Revenues declined 16.6% year over year to $5.15 billion but beat the consensus mark by 2.9%. The year-over-year decline was primarily due to automotive shutdowns and slow ramp of projects.
Most of Flex’s North American and European auto-production sites remained closed in the reported quarter.
Segment Details
Beginning fiscal first quarter, the company started reporting in two segments - Flex Agility Solutions Group and Flex Reliability Solutions Group.
Flex Agility Solutions Group comprises Health Solutions, Automotive and Industrial businesses. Revenues declined 1% year over year to $2.24 billion.
Markedly, the company has produced more than 20 million masks to date at seven locations across the globe. Moreover, all of Flex’s production sites around the globe are up and running and the company witnessed significant improvement in supply chain, which was massively disrupted by the coronavirus outbreak.
Flex’s Health Solutions business benefited from strong demand for ventilators, testing equipment, oxygen concentrators, fusion pumps, patient monitors and ICU beds. The company also saw continued strength in industrial end-market such as power products.
Flex Reliability Solutions Group comprises Communications & Enterprise Compute or CEC, Lifestyle and Consumer Devices businesses. Revenues plunged 25% year over year to $2.91 billion.
CEC benefited from strong demand for networking and compute equipment to support the increased workload from work-and-learn from home. However, sluggish Lifestyle and Consumer Devices businesses negatively impacted the segment’s growth in the quarter under review.
Operating Details
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis and came in at 6.2% in the reported quarter.
Non-GAAP selling, general & administrative (SG&A) expenses as a percentage of revenues declined 20 bps year over year to 3%.
Non-GAAP operating margin contracted 20 bps on a year-over-year basis to 3.2%.
Flex Agility Solutions Group operating margin was 5.1%. Flex Reliability Solutions Group operating margin was 2.5%
Balance Sheet & Cash Flow
As of Jun 30, 2020, cash & cash equivalents were $1.94 billion, up from $1.92 billion as of Mar 31, 2020.
Total debt was $3.56 billion as of Jun 30, up from $2.84 billion as of Mar 31.
Net cash used by operating activities was $629.4 million during the reported quarter compared with $656.9 million used in operations in the year-ago quarter and $50.9 million used in operations in the previous quarter.
Free cash outflow was $74 million in the reported quarter compared with free cash flow of $114 million in the year-ago quarter and $134 million in the previous quarter.
Guidance
For second quarter of fiscal 2021, Flex expects revenues between $5.4 billion and $5.7 billion. Adjusted operating income is expected between $180 million and $220 million.
Adjusted earnings are expected in the range of 25-31 cents per share.
Flex plans to phase out certain non-core functions and streamline organizational structure. The company intends to focus on key markets where it has competitive leverage and domain expertise. Charges related to these reorganizations are expected to be $100 million for the rest of fiscal 2021. Flex expects to save $60 million in fiscal 2022 related to these activities.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -69.23% due to these changes.
VGM Scores
Currently, Flex has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Flex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.