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Here's Why Investors Need to Retain FLEX in the Portfolio

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Flex Ltd (FLEX - Free Report) is benefiting from higher demand for its solutions across end markets like automotive and industrial.

The company’s fiscal 2023 and 2024 revenues are anticipated to rise 8.1% and 5.7%, respectively, while earnings are expected to increase 10.2% and 15%, respectively.

For the first quarter of fiscal 2023, the consensus estimate for earnings and revenues is pegged at 49 cents per share and $6.8 billion, suggesting year-over-year growth of 6.5% and 7.2%, respectively.

FLEX has outpaced estimates in all of the trailing four quarters, delivering an earnings surprise of 21.1%, on average.

In the last reported quarter, FLEX delivered adjusted earnings of 52 cents per share, beating the Zacks Consensus Estimate by 18.2%. The bottom line also rose 6.1% year over year. Revenues increased 9.3% year over year to $6.85 billion and surpassed the consensus mark by 6.5%.

The company also has an impressive VGM Score of A. This style score consolidates all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth.

The stock has proved to be more resilient to volatility than the Zacks sub-industry it belongs. In the past year, FLEX has lost 10.6% against a 42.1% decline of the Zacks sub-industry.

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Moreover, the stock is down 26.4% from its 52-week high level of $19.50 on Nov 17, 2021, making it relatively affordable for investors.

Strong Fundamentals

Based in Singapore,  Flex provides supply chain, technology innovation and manufacturing solutions to various industries across several end markets. The company is witnessing strong demand in the automotive and industrial sectors.

Going ahead, the company expects demand to remain strong in the automotive sector owing to new launches in autonomy and connectivity. In the industrial sector, increasing product ramps in production and packaging, renewables, and data center power is likely to drive demand for solutions.

The company is investing in high-growth markets like next-generation mobility, digital healthcare, cloud expansion, robotics, smart living and automation, among others.  This bodes well in the long haul.

Acquisitions, over time, have been Flex’s most favored mode for expanding its manufacturing footprint and penetrating new end-markets. Acquisitions like Bose facilities, Mirror Controls International (MCi), Alcatel-Lucent facility, and NEXTracker expanded footprint in audio systems, automotive, telecom and smart solar tracking solution markets.

In December 2021, the company acquired Anord Mardix, which specializes in critical power solutions, from private equity firm Bertram Capital for $540 million. The acquisition is likely to aid the company to expand its presence in the industrial sector.

However, supply chain-induced higher freight and logistics costs continue to be a headwind, affecting profit margins of this Zacks Rank #3 (Hold) stock.

Other Stocks to Consider

A few better-ranked stocks from the broader technology sector worth consideration are Synopsys (SNPS - Free Report) , Aspen Technology (AZPN - Free Report) and Broadcom (AVGO - Free Report) . Broadcom sports a Zacks Rank #1 (Strong Buy) while Synopsys and Aspen carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $37.06 per share, up 4% in the past 60 days. AVGO’s long-term earnings growth rate is pegged at 14.5%.

Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 2.2%. Shares of AVGO have gained 4.8% of their value in the past year.

The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, rising 9.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.

Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have increased 11.7% in the past year.

The Zacks Consensus Estimate for Aspen’s fiscal 2022 earnings is pegged at $5.49 per share, rising 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.

Aspen’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 4.1%. Shares of AZPN have grown 21.7% in the past year.


In-Depth Zacks Research for the Tickers Above


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Flex Ltd. (FLEX) - free report >>

Broadcom Inc. (AVGO) - free report >>

Synopsys, Inc. (SNPS) - free report >>

Aspen Technology, Inc. (AZPN) - free report >>

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