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Flex (FLEX) Up 0.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Flex (FLEX - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Flex due for a pullback? 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 drivers.

Flex Q4 Earnings & Revenues Surpass Estimates, Rise Y/Y

Flex Ltd. reported fourth-quarter fiscal 2022 adjusted earnings of 52 cents per share, beating the Zacks Consensus Estimate by 18.2%. The bottom line also grew 6.13% year over year.

Revenues increased 9.3% year over year to $6.85 billion and surpassed the consensus mark by 6.47%. 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.

Segment Details

The Flex Agility Solutions Group comprises the Communications & Enterprise Compute or CEC, Lifestyle, and Consumer Devices businesses. The group’s revenues were up 4.3% year over year to $3.6 billion.

Agility continued to grow at a profitable rate. The increases in CEC and Lifestyle were partially offset by a planned decline in consumer devices.

The Flex Reliability Solutions Group comprises the Health Solutions, Automotive and Industrial businesses. The group’s revenues went up 12.3% year over year to $2.8 billion. Demand remained healthy across automotive and industrial verticals, and impressive execution against demand in Industrial helped boost revenues.

Operating Details

The non-GAAP gross margin contracted 80 basis points (bps) on a year-over-year basis to 7.3% in the reported quarter.

The non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of revenues was 3% remained unchanged from the prior-year period.

The non-GAAP operating margin also fell 60 bps year over year to 4.3%.

The Flex Agility Solutions Group’s adjusted operating margin was 4.2%, up 27 bps year over year. The Flex Reliability Solutions Group’s adjusted operating margin was 4.9%, down 74 bps.

Balance Sheet & Cash Flow

As of Mar 31, 2022, cash & cash equivalents stood at $2.96 billion compared with $2.57 billion as of Dec 31, 2021.

As of Mar 31, total debt (including the current portion) stood at $4.2 billion compared with $4.45 billion as of Dec 31, 2021.

In fourth-quarter fiscal 2022, the company generated cash flow from operating activities of $360 million and an adjusted free cash flow of $252 million.

Guidance

For first-quarter fiscal 2023, Flex expects revenues between $6.6 billion and $7 billion.

It expects adjusted earnings of 44-50 cents per share. The adjusted operating income is projected between $285 million and $315 million.

For fiscal 2023, Flex expects revenues between $27.7 billion and $28.7 billion.
It expects adjusted earnings of $2.09-$2.24 per share. The adjusted operating income margin is projected to be 4.7-4.9%.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Flex has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 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 this revision looks promising. It comes with little surprise Flex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Flex is part of the Zacks Electronics - Miscellaneous Products industry. Over the past month, Carrier Global (CARR - Free Report) , a stock from the same industry, has gained 5.6%. The company reported its results for the quarter ended March 2022 more than a month ago.

Carrier Global reported revenues of $4.65 billion in the last reported quarter, representing a year-over-year change of -1%. EPS of $0.54 for the same period compares with $0.48 a year ago.

Carrier Global is expected to post earnings of $0.62 per share for the current quarter, representing a year-over-year change of -3.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Carrier Global has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.


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