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Bear of the Day: Fabrinet (FN)

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OEM services company Fabrinet (FN - Free Report) started 2017 strongly, but the stock has toppled since hitting new highs in February and has been unable to garner any positive momentum recently. Now, after a disappointing quarter, it could be time to ditch FN for good.

Fabrinet provides precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and sub-systems, industrial lasers and sensors.

After sluggish results in its most recent quarter led to slipping earnings estimate revisions, Fabrinet is now sitting at a Zacks Rank #5 (Strong Sell), with shares already down about 20% on the year.

Latest Earnings Results

In its most recent quarter, Fabrinet posted earnings of 75 cents per share, missing our Zacks Consensus Estimate of 80 cents per share. The company also saw revenues of $357 million, which missed our consensus estimate of $359 million.

Management also announced guidance for its upcoming fiscal period. Fabrinet now expects current-quarter earnings to fall in the range of 69 cents to 71 cents per share. Revenue is expected to be in the range of $328 million to $332 million.

In the comparable quarter last year, Fabrinet reported earnings of 91 cents per share and revenues of $351 million, so the company's projections signal some significant retraction.

Estimate Revisions and Key Stats

As a result of this sluggish outlook, negative earnings estimate revisions have been pouring in. In fact, the Zacks Consensus Estimate for the company's full-year earnings has slipped by 42 cents over the past 30 days. The Zacks Consensus Estimate for the company's next fiscal year has lost 38 cents over that same timeframe.

In addition to these weak estimates, the company is sporting an “F” grade for Momentum in our Style Scores system. Shares have now slipped over 27% in the past year, making it one of the weakest stocks in an otherwise strong tech sector.

Better Options

For investors looking for other options in this space, it could be better to look elsewhere in Fibranet's “Electronics - Miscellaneous Components” industry. This group has gained an average of 40% year-to-date and includes Zacks Rank #1 (Strong Buy) stocks like Kyocera KYO.

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