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Flex (FLEX) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

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Flex Ltd. (FLEX - Free Report) reported fourth-quarter fiscal 2021 adjusted earnings of 49 cents per share that beat the Zacks Consensus Estimate by 36.1%. Moreover, the figure increased 75% year over year.

Revenues increased 14% year over year to $6.27 billion and beat the consensus mark by 7.7%. The top line benefited from continued strength in the Agility Solutions and Reliability Solutions segments.

After a massive disruption due to coronavirus outbreak, automotive sector, globally, is now witnessing strong recovery that bodes well for Flex in the long term. Flex is expanding its business in the automotive sector especially in the field of autonomous cars and electrification.

The company also announced that it earlier submitted a draft registration statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC") for its NEXTracker business. The draft registration pertains to the proposed initial public offering of NEXTracker’s Class A common stock. The company refrained from providing any further details on NEXTracker’s future.

Flex Ltd. Price, Consensus and EPS Surprise

 

Flex Ltd. Price, Consensus and EPS Surprise

Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote


For fiscal 2021, Flex reported revenues of $24.1 billion, down 0.4% year over year. Adjusted earnings of $1.57 per share increased 27.6% year over year.

In the past year, shares of Flex have returned 89.9% compared with industry’s return of 89.1%.

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 Communications & Enterprise Compute or CEC, Lifestyle and Consumer Devices businesses. Revenues increased 17% year over year to $3.429 billion.

Within the segment, Lifestyle division reported 22% revenue growth driven by new business ramps as well as higher demand for goods in audio floor care and appliance end markets.

CEC unit revenues improved 11% on a year-over-year basis. The segment’s top line benefitted from higher cloud and critical infrastructure spend as well as accelerated 5G deployment.

Consumer devices’ top line increased 24% on a year-over-year basis due to easy year-over-year comparisons.

Flex Reliability Solutions Group comprises Health Solutions, Automotive and Industrial businesses. Revenues increased 11.1% year over year to $2.837 billion.

In automotive, ongoing recovery in the sector, globally, was the driving factor behind increases in the segment’s revenues in the quarter under review. On a year-over-year basis, automotive unit reported top-line growth of 20% in the fiscal fourth quarter.

Also, Flex’s Health Solutions business continued to benefit from higher demand for critical care equipment like ventilators, fusion pumps, patient monitors and ICU beds along with improving demand in areas such as elective procedures. The segment’s top line increased 25% year over year.

Revenues from Industrial unit were up low single digits primarily due to improvement in core industries.

Operating Details

Non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis and came in at 8.1% in the reported quarter.

Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of revenues, declined 30 bps year over year to 3.1%.

Non-GAAP operating margin expanded 110 bps on a year-over-year basis to 4.9%, benefiting from cost-containment efforts.

Flex Agility Solutions Group adjusted operating margin was 4%. Flex Reliability Solutions Group adjusted operating margin was 6.7%

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash & cash equivalents were $2.64 billion, up from $2.61 billion as of Dec 31, 2020.

Long-term debt (including current portion) was $3.78 billion as of Dec 31, up from $3.81 billion as of Dec 31.

Net cash provided by operating activities was $161 million during the reported quarter compared with $166 million reported in the year-ago quarter and $348 million of net cash generated in the previous quarter.

Adjusted free cash flow was $135 million in the reported quarter compared with free cash flow of $134 million in the year-ago quarter and $289 million of free cash flow in the previous quarter.

Guidance

For first-quarter fiscal 2022, Flex expects revenues between $5.9 billion and $6.3 billion. The Zacks Consensus Estimate for revenues is currently pegged at $5.84 billion.

Adjusted operating income is expected between $240 million and $280 million.

Adjusted earnings are expected in the range of 34-40 cents per share. The consensus mark for earnings is currently pegged at 32 cents per share.

For the fiscal first quarter, Flex Agility solutions are expected to report year-over-year revenue growth of low-to-high teens. The upside is likely to be driven by continued strength in Lifestyle and CEC units along with ongoing recovery in the emerging markets to benefit Consumer Devices’ revenues.

Lifestyle segment revenues are anticipated to be up 30-40% on a year-over-year basis. CEC is projected to be up in low to mid-single digits year over year in the fiscal first quarter.

Consumer Devices’ revenues are expected to rise 25-35% in the fiscal first quarter on a year-over-year basis.

Flex Reliability Solutions is projected to report year-over-year revenue growth of 15-25% based on a recovering automotive sector along with continued strength in industrial end-market such as core industrial and power products. Automotive division revenues are expected to nearly double on a year-over-year basis due to recovery in the automotive sector. Industrial segment top line is expected to be up mid- to high-single digits driven by solid improvements and easy year over year comparisons.

Health Solutions’ division revenues are likely to witness flat to up mid-single digits year-over-year growth.

For fiscal 2022, Flex expects revenues between $25 billion and $26 billion. The Zacks Consensus Estimate for revenues is currently pegged at $24.75 billion.

Adjusted operating income margin is expected between 4.4% and 4.6%.

Adjusted earnings are expected in the range of $1.60-$1.75 per share. The consensus mark for earnings is currently pegged at $1.55 per share.

Zacks Rank & Stocks to Consider

Currently, Flex carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector worth consideration are Agilent Technologies (A - Free Report) , Pure Storage (PSTG - Free Report) and NVIDIA (NVDA - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Agilent scheduled to report quarterly results on May 25, while NVIDIA and Pure Storage are slated to announce results on May 26.

Long-term earnings growth rate of Agilent, Pure Storage and NVIDIA is pegged at 9%, 52.2% and 15.1%, respectively.

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