It has been about a month since the last earnings report for Flex (FLEX Quick QuoteFLEX - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Flex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

FLEX Q3 Earnings and Revenues Top Estimates

Flex reported third-quarter fiscal 2023 adjusted earnings of 62 cents per share, beating the Zacks Consensus Estimate by 3.33%. The bottom line also grew 24% year over year.

Revenues increased 17% year over year to $7.8 billion, surpassing the consensus mark by 3.7%. The company benefited from strength across the Agility Solutions and Reliability Solutions segments.

Segment Details

The Flex Agility Solutions Group comprises the Communications & Enterprise Compute or CEC and Lifestyle and Consumer Devices businesses. The group’s revenues were up 13% year over year to $4 billion. The increases in CEC and Lifestyle were partially offset by macroeconomic constraints.

The Flex Reliability Solutions Group comprises Health Solutions, Automotive and Industrial businesses. The group’s revenues went up 19% year over year to $3.2 billion. Demand remained healthy across the business segment, partly offset by the semiconductor shortage.

The Nextracker group’s revenue went up 53% year over year to $0.5 billion.

Operating Details

The non-GAAP gross margin increased 20 bps on a year-over-year basis to 7.7% in the reported quarter.

The non-GAAP selling, general & administrative expenses, as a percentage of revenues, were 2.9% which decreased 10 bps from the prior-year period.

The non-GAAP operating margin expanded 30 bps year over year to 4.8%.

The Flex Agility Solutions Group’s adjusted operating margin was 4.5%, down 5 bps year over year. The Flex Reliability Solutions Group’s adjusted operating margin was 4.4%, down 55 bps. The Nextracker Group’s adjusted operating margin was 11.7%, up 620 bps.

Balance Sheet & Cash Flow

As of Dec 31, 2022, cash & cash equivalents stood at $2.57 billion compared with $2.45 billion as of Sep 30, 2022.

As of Dec 31, 2022, total debt (net of current portion) stood at $3.52 billion compared with $3.08 billion as of Sep 30, 2022.

In third-quarter fiscal 2023, the company generated cash flow from operating activities of $359 million and an adjusted free cash flow of $202 million.

In the quarter under review, the company repurchased shares worth $40 million.

Guidance

For fourth-quarter fiscal 2023, Flex expects revenues between $7 billion and $7.4 billion.

The company expects adjusted earnings of 48-54 cents per share. The adjusted operating income is projected to be between $315 million and $345 million.

For fiscal 2023, Flex expects revenues between $29.9 billion and $30.3 billion.
It expects adjusted earnings of $2.27-$2.33 per share. The adjusted operating margin is projected to be 4.7%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

The consensus estimate has shifted 13.92% due to these changes.

VGM Scores

At this time, Flex has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Flex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.