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Flex (FLEX) Q3 Earnings Beat Estimates, Revenues Fall Y/Y
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Flex Ltd. (FLEX - Free Report) reported third-quarter fiscal 2022 adjusted earnings of 50 cents per share, beating the Zacks Consensus Estimate by 21.95%. The bottom line also grew 2% year over year.
Revenues decreased 1.5% year over year to $6.62 billion but surpassed the consensus mark by 4.9%. Nonetheless, the company benefited from strength across the Agility Solutions and Reliability Solutions segments, along with a solid end-market focus on the back of emerging opportunities.
The Flex Agility Solutions Group comprises the Communications & Enterprise Compute or CEC, Lifestyle and Consumer Devices businesses. Revenues were down 6.6% year over year to $3.58 billion.
Lifestyle benefited from the continued robust demand for high-end durable goods, new product ramps and customer wins. CEC’s top line gained from higher demand for cloud and optical solutions as well as accelerated 5G deployment. However, the consumer devices unit faced headwinds from planned project completion.
The Flex Reliability Solutions Group comprises the Health Solutions, Automotive and Industrial businesses. Revenues went up 5.3% year over year to $3.04 billion. Though demand remained healthy across automotive and industrial verticals, continued supply chain constraints stemming from the pandemic posed a major woe.
Operating Details
The non-GAAP gross margin contracted 10 basis points (bps) on a year-over-year basis to 7.5% in the reported quarter.
The non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of revenues, remained unchanged year over year at 3%.
The non-GAAP operating margin also fell 10 bps to 4.5% on lower gross margin.
The Flex Agility Solutions Group’s adjusted operating margin was 4.6%, up 60 bps year over year. The Flex Reliability Solutions Group’s adjusted operating margin was 5.1%, having shrunk 110 bps.
Balance Sheet & Cash Flow
As of Dec 31, 2021, cash & cash equivalents were $2.57 billion, up from $2.46 billion as of Oct 1, 2021.
Total debt (including current portion) was $4.45 billion as of Dec 31, up from $3.79 billion as of Oct 1, 2021.
During the first nine months of fiscal 2022, the company generated cash flow from operating activities of $664 million and adjusted free cash flow of $340 million.
Guidance
Despite the prevalent supply-chain and logistics disruptions, Flex raised its revenue outlook for fiscal 2022. For fiscal 2022, Flex expects revenues between $25.4 billion and $25.8 billion, up from the prior guided range of $24.8-$25.8 billion. The updated outlook reflects 6% year-over-year growth at the midpoint.
It expects adjusted earnings in the range of $1.85-$1.90 per share compared with the previous outlook of $1.70-$1.85.
For fourth-quarter fiscal 2022, Flex expects revenues between $6.2 billion and $6.6 billion.
The adjusted operating income is projected between $265 million and $305 million. Adjusted earnings are expected in the 41-46 cents per share band.
The Zacks Consensus Estimate for Allied Motion Technologies’ next-year earnings has been revised 10.1% upward over the past 60 days.
Allied Motion Technologies delivered a trailing four-quarter earnings surprise of 46.2%, on average. It has returned 20.5% in the past year. AMOT has a long-term earnings growth expectation of 10%.
The Zacks Consensus Estimate for salesforce.com’s current-year earnings has been revised 6.4% upward over the past 60 days.
salesforce.com delivered a trailing four-quarter earnings surprise of 44.2%, on average. Although it has lost 5.4% in the past year, CRM has a long-term earnings growth expectation of 16.8%.
The Zacks Consensus Estimate for Progress Software’s current-year earnings has been revised 3.9% upward over the past 60 days.
Progress Software delivered a trailing four-quarter earnings surprise of 26.8%, on average. The stock has returned 8.1% in the past year. PRGS has a long-term earnings growth expectation of 2%.
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Flex (FLEX) Q3 Earnings Beat Estimates, Revenues Fall Y/Y
Flex Ltd. (FLEX - Free Report) reported third-quarter fiscal 2022 adjusted earnings of 50 cents per share, beating the Zacks Consensus Estimate by 21.95%. The bottom line also grew 2% year over year.
Revenues decreased 1.5% year over year to $6.62 billion but surpassed the consensus mark by 4.9%. Nonetheless, the company benefited from strength across the Agility Solutions and Reliability Solutions segments, along with a solid end-market focus on the back of emerging opportunities.
Flex Ltd. Price, Consensus and EPS Surprise
Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote
Segment Details
The Flex Agility Solutions Group comprises the Communications & Enterprise Compute or CEC, Lifestyle and Consumer Devices businesses. Revenues were down 6.6% year over year to $3.58 billion.
Lifestyle benefited from the continued robust demand for high-end durable goods, new product ramps and customer wins. CEC’s top line gained from higher demand for cloud and optical solutions as well as accelerated 5G deployment. However, the consumer devices unit faced headwinds from planned project completion.
The Flex Reliability Solutions Group comprises the Health Solutions, Automotive and Industrial businesses. Revenues went up 5.3% year over year to $3.04 billion. Though demand remained healthy across automotive and industrial verticals, continued supply chain constraints stemming from the pandemic posed a major woe.
Operating Details
The non-GAAP gross margin contracted 10 basis points (bps) on a year-over-year basis to 7.5% in the reported quarter.
The non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of revenues, remained unchanged year over year at 3%.
The non-GAAP operating margin also fell 10 bps to 4.5% on lower gross margin.
The Flex Agility Solutions Group’s adjusted operating margin was 4.6%, up 60 bps year over year. The Flex Reliability Solutions Group’s adjusted operating margin was 5.1%, having shrunk 110 bps.
Balance Sheet & Cash Flow
As of Dec 31, 2021, cash & cash equivalents were $2.57 billion, up from $2.46 billion as of Oct 1, 2021.
Total debt (including current portion) was $4.45 billion as of Dec 31, up from $3.79 billion as of Oct 1, 2021.
During the first nine months of fiscal 2022, the company generated cash flow from operating activities of $664 million and adjusted free cash flow of $340 million.
Guidance
Despite the prevalent supply-chain and logistics disruptions, Flex raised its revenue outlook for fiscal 2022. For fiscal 2022, Flex expects revenues between $25.4 billion and $25.8 billion, up from the prior guided range of $24.8-$25.8 billion. The updated outlook reflects 6% year-over-year growth at the midpoint.
It expects adjusted earnings in the range of $1.85-$1.90 per share compared with the previous outlook of $1.70-$1.85.
For fourth-quarter fiscal 2022, Flex expects revenues between $6.2 billion and $6.6 billion.
The adjusted operating income is projected between $265 million and $305 million. Adjusted earnings are expected in the 41-46 cents per share band.
Zacks Rank & Stocks to Consider
Flex currently has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader industry include Allied Motion Technologies Inc. , salesforce.com, inc. (CRM - Free Report) and Progress Software Corporation (PRGS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Allied Motion Technologies’ next-year earnings has been revised 10.1% upward over the past 60 days.
Allied Motion Technologies delivered a trailing four-quarter earnings surprise of 46.2%, on average. It has returned 20.5% in the past year. AMOT has a long-term earnings growth expectation of 10%.
The Zacks Consensus Estimate for salesforce.com’s current-year earnings has been revised 6.4% upward over the past 60 days.
salesforce.com delivered a trailing four-quarter earnings surprise of 44.2%, on average. Although it has lost 5.4% in the past year, CRM has a long-term earnings growth expectation of 16.8%.
The Zacks Consensus Estimate for Progress Software’s current-year earnings has been revised 3.9% upward over the past 60 days.
Progress Software delivered a trailing four-quarter earnings surprise of 26.8%, on average. The stock has returned 8.1% in the past year. PRGS has a long-term earnings growth expectation of 2%.