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Plexus (PLXS) Misses Earnings & Revenue Estimates in Q4

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Plexus Corp (PLXS - Free Report) reported lower-than-expected fourth quarter fiscal 2016 results. Quarterly adjusted earnings of 67 cents per share and revenues of $653.1 million missed the respective Zacks Consensus Estimate of 80 cents and $670.1 million. Revenues were down 2.3% on a year over year given continued weakness in Networking/Communications sector.

Revenues from the Networking/Communications sector (20% of total revenue) plummeted 28.5% year over year to $128 million.

Healthcare/Life Sciences (29%) revenues were up 4.9% from the year-ago quarter to $192 million.

Industrial/Commercial (35%) revenues increased 14.9% year over year to $231 million.

Defense/Security/Aerospace segment (16%) revenues fell 3.8% on a year-over-year basis to $102 million.

During the quarter, the company won 37 programs for which it anticipates approximately $200 million in annualized revenues once production commences.

Region-wise, the company’s revenues from Americas and Asia Pacific declined 7% and 6.3%, respectively, on a year-over-year basis. Nonetheless, Plexus’ revenues from Europe, Middle East, and Africa regions were almost flat year over year at $44 million.

Margins

Plexus reported adjusted operating profit of $33.5 million in the quarter, up 17.4% year over year. Adjusted operating margin increased 80 basis points year over year to 5.1%.

Balance Sheet & Cash Flow

Plexus exited the fiscal with cash & cash equivalents worth $433 million compared with $357.1 million as on fiscal 2015-end. The company had long-term debt and capital lease obligations of about $184 million compared with $258.3 million as of Oct 31, 2015.

For the fiscal, the company generated $127.7 million in cash flow from operations in the quarter and used $31.1 million for capital expenditures. Free cash flow came in at about $96.6 million. Share repurchases for the fiscal amounted to $30 million. 

Outlook

For the first quarter of fiscal 2017, revenues are projected in the range of $620 million - $650 million. GAAP earnings are projected within 74 to 82 cents per share. 

PLEXUS CORP Price, Consensus and EPS Surprise

PLEXUS CORP Price, Consensus and EPS Surprise | PLEXUS CORP Quote

Our Take

We believe new program wins (added over $747 million in revenues in the trailing four quarters) along with global expansion will drive growth over the long term. Plexus remains confident of achieving $3 billion revenue run rate in the fiscal 2017. In fiscal 2016, the company reported full year revenues of $2.6 billion. Additionally, the consolidation of the company’s production facilities in low-cost areas is expected to boost margins, going forward.

However, a mature electronic manufacturing services market and intense competition from the likes of Jabil Circuit (JBL - Free Report) , Celestica Inc. (CLS - Free Report) and Flextronics (FLEX - Free Report) remain headwinds. Additionally, the company expects weakness in the Networking/Communications market to impact the business in the near term.

Currently, Plexus has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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