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FLEX Stock Rises 19.6% YTD: Will the Upward Trend Continue?
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Flex (FLEX - Free Report) witnessed strong momentum this year so far, with its shares rallying 19.6% compared with the sub-industry’s 18.5% growth.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, FLEX has a VGM Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 (Buy) and a VGM Score of A or B offer solid investment opportunities.
The company provides advanced manufacturing solutions and supply-chain services throughout the product lifecycle development including fulfillment, after-market support and circular economy solutions.
Flex serves companies of all sizes in various industries and end-markets including medical, automotive, industrial, home appliances, capital equipment, energy, telecom, networking, enterprise compute, wearables, connected living and mobile.
Image Source: Zacks Investment Research
Catalysts Driving Growth
Flex has a diversified end-market as well as customer base. Moreover, based on its growing intellectual property portfolio, the company is well positioned to address the needs of customers who are looking to leverage the proliferation of Internet of Things, autonomous/connected cars, artificial intelligence (AI), industrial automation, augmented & virtual reality, and 5G technologies.
FLEX’s automotive business continues to perform well due to program wins and steady vehicle content expansion. Increasing demand for electric vehicles (EV) and advanced driver-assistance systems also bodes well.
The industrial segment is likely to benefit from solid demand for EV charging, automation and cloud/critical power. The healthcare segment is expected to benefit from several program ramps and long-term secular trends.
Over the long term, the company expects Communications & Enterprise Compute to benefit from secular growth trends in cloud and networking technology mainly due to strong AI-driven cloud spending.
Its capital allocation strategy to enhance long-term shareholders’ value is noteworthy. In the last reported quarter, FLEX repurchased shares worth $309 million.
The firm remains on track to complete its tax-free spin off of Nextracker by fourth quarter of fiscal 2024.
However, at present, Flex is facing weakness in consumer-related demand which is affecting the Lifestyle segment’s performance. Subdued IT spending amid global macro weakness is an additional headwind.
For fiscal 2024, Flex now expects total revenues to be between $28.1 billion and $28.8 billion compared with the earlier guidance of $30.5-$31.5 billion. It anticipates adjusted EPS in the range of $2.49-$2.66 compared with the previous prediction of $2.35-$2.55. Adjusted operating margin is projected in the range of 5.8-6% compared with the prior estimate of 5-5.2%.
A Look At Estimates
FLEX’s fiscal 2024 and 2025 EPS are suggested to increase 8.5% and 19% on a year-over-year basis to $2.56 and $3.05, respectively.
Over the last 60 days, estimates for fiscal 2024 and 2025 earnings have improved 3.6% and 10.1%, respectively.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has remained unchanged in the past 60 days at $15.93. ADBE’s long-term earnings growth rate is 13.5%.
Adobe’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.3%. Shares of ADBE have surged 80.8% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2024 EPS has remained flat in the past 30 days at $12.52. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have gained 57.6% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 2.8% in the past 60 days to $8.00.
WTS’ earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 11.8%. Shares of WTS have surged 19.6% in the past year.
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FLEX Stock Rises 19.6% YTD: Will the Upward Trend Continue?
Flex (FLEX - Free Report) witnessed strong momentum this year so far, with its shares rallying 19.6% compared with the sub-industry’s 18.5% growth.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, FLEX has a VGM Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 (Buy) and a VGM Score of A or B offer solid investment opportunities.
The company provides advanced manufacturing solutions and supply-chain services throughout the product lifecycle development including fulfillment, after-market support and circular economy solutions.
Flex serves companies of all sizes in various industries and end-markets including medical, automotive, industrial, home appliances, capital equipment, energy, telecom, networking, enterprise compute, wearables, connected living and mobile.
Image Source: Zacks Investment Research
Catalysts Driving Growth
Flex has a diversified end-market as well as customer base. Moreover, based on its growing intellectual property portfolio, the company is well positioned to address the needs of customers who are looking to leverage the proliferation of Internet of Things, autonomous/connected cars, artificial intelligence (AI), industrial automation, augmented & virtual reality, and 5G technologies.
FLEX’s automotive business continues to perform well due to program wins and steady vehicle content expansion. Increasing demand for electric vehicles (EV) and advanced driver-assistance systems also bodes well.
The industrial segment is likely to benefit from solid demand for EV charging, automation and cloud/critical power. The healthcare segment is expected to benefit from several program ramps and long-term secular trends.
Over the long term, the company expects Communications & Enterprise Compute to benefit from secular growth trends in cloud and networking technology mainly due to strong AI-driven cloud spending.
Its capital allocation strategy to enhance long-term shareholders’ value is noteworthy. In the last reported quarter, FLEX repurchased shares worth $309 million.
The firm remains on track to complete its tax-free spin off of Nextracker by fourth quarter of fiscal 2024.
However, at present, Flex is facing weakness in consumer-related demand which is affecting the Lifestyle segment’s performance. Subdued IT spending amid global macro weakness is an additional headwind.
For fiscal 2024, Flex now expects total revenues to be between $28.1 billion and $28.8 billion compared with the earlier guidance of $30.5-$31.5 billion. It anticipates adjusted EPS in the range of $2.49-$2.66 compared with the previous prediction of $2.35-$2.55. Adjusted operating margin is projected in the range of 5.8-6% compared with the prior estimate of 5-5.2%.
A Look At Estimates
FLEX’s fiscal 2024 and 2025 EPS are suggested to increase 8.5% and 19% on a year-over-year basis to $2.56 and $3.05, respectively.
Over the last 60 days, estimates for fiscal 2024 and 2025 earnings have improved 3.6% and 10.1%, respectively.
Other Key Picks
Some other top-ranked stocks worth consideration in the broader technology space are Adobe (ADBE - Free Report) , Synopsys (SNPS - Free Report) and Watts Water Technologies (WTS - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has remained unchanged in the past 60 days at $15.93. ADBE’s long-term earnings growth rate is 13.5%.
Adobe’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.3%. Shares of ADBE have surged 80.8% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2024 EPS has remained flat in the past 30 days at $12.52. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have gained 57.6% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 2.8% in the past 60 days to $8.00.
WTS’ earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 11.8%. Shares of WTS have surged 19.6% in the past year.