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Why Is Flex (FLEX) Down 10.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Flex (FLEX - Free Report) . Shares have lost about 10.2% 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 catalysts.
Flex reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of 77 cents, which surpassed the Zacks Consensus Estimate by 20.3%. The bottom line compared favorably with 54 cents posted in the prior-year quarter.
Revenues increased 2.1% year over year to $6.6 billion. Also, it beat the consensus mark by 5.5%. The uptick was driven by strong demand across its data center, medical device and consumer-focused portfolios.
Segment Details
The Flex Reliability Solutions Group encompasses Health Solutions, Automotive and Industrial businesses. Revenues remained stable at $3 billion, as sustained strength in power and medical devices offset challenges in the automotive sector. The automotive industry continues to face difficulties due to persistent pressures from a weak macroeconomic environment.
The Flex Agility Solutions Group comprises Communications & Enterprise Compute or CEC and Lifestyle and Consumer Devices businesses. Revenues were up 4% to $3.6 billion. This uptick was driven by robust cloud and consumer-related end markets.
Operating Details
Management highlighted ongoing margin expansion, which was driven by a favorable mix and increased efficiency across both its business units.
Non-GAAP gross margin expanded 150 basis points (bps) year over year to 9.3% in the reported quarter.
Non-GAAP operating income came in at $399 million, up from the prior-year level of $314 million. Non-GAAP operating margin expanded 120 bps to 6.1%. This was fueled by robust gross margin performance and sustained cost efficiency.
The adjusted operating margins of the Flex Reliability Solutions Group were 6.7%, up 130 bps from the prior-year level. The adjusted operating margins of the Flex Agility Solutions Group improved 120 bps to 6.3%.
Selling, general & administrative expenses totaled $241 million, up 17.6% year over year.
Balance Sheet & Cash Flow
As of Dec. 31, 2024, cash & cash equivalents and long-term debt (net of current portion) were $2.31 billion and $3.15 billion, respectively, compared with $2.47 billion and $3.26 billion a year ago.
The company generated a third-quarter fiscal 2025 cash flow from operating activities of $413 million and an adjusted free cash flow of $306 million.
In the quarter, the company repurchased $200 million worth of stock, amounting to nearly 5.5 million shares. As of Dec. 31, 2024, FLEX repurchased shares worth $950 million.
Outlook
For the fourth quarter of fiscal 2025, Flex expects revenues to be between $6 billion and $6.4 billion. Management expects adjusted earnings of 65-73 cents per share, excluding 5 cents for net restructuring charges, 8 cents for stock-based compensation expense and 4 cents for net intangible amortization. Adjusted operating income is projected to be between $360 million and $400 million.
For the Reliability Solutions business, management forecasts sales to remain flat to down mid-single digits owing to softness in the automotive vertical. Agility Solutions’ revenues are anticipated to be flat to up mid-single digits, with steady growth expected in cloud markets.
Driven by consistent sturdy performance in a dynamic market, Flex now expects revenues to be between $25.4 billion and $25.8 billion for fiscal 2025. Earlier it projected revenues in the $24.9-$25.5 billion band.
It now anticipates adjusted earnings in the range of $2.57-$2.65 per share, excluding 28 cents for stock-based compensation expense, 15 cents for net intangible amortization and 12 cents for net restructuring charges. Earlier EPS projections ranged from $2.39 to $2.51.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 7.02% due to these changes.
VGM Scores
Currently, Flex has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 A. 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 these revisions 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.
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Why Is Flex (FLEX) Down 10.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Flex (FLEX - Free Report) . Shares have lost about 10.2% 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 catalysts.
Flex's Q3 Earnings & Revenues Beat Estimates, Rise Y/Y
Flex reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of 77 cents, which surpassed the Zacks Consensus Estimate by 20.3%. The bottom line compared favorably with 54 cents posted in the prior-year quarter.
Revenues increased 2.1% year over year to $6.6 billion. Also, it beat the consensus mark by 5.5%. The uptick was driven by strong demand across its data center, medical device and consumer-focused portfolios.
Segment Details
The Flex Reliability Solutions Group encompasses Health Solutions, Automotive and Industrial businesses. Revenues remained stable at $3 billion, as sustained strength in power and medical devices offset challenges in the automotive sector. The automotive industry continues to face difficulties due to persistent pressures from a weak macroeconomic environment.
The Flex Agility Solutions Group comprises Communications & Enterprise Compute or CEC and Lifestyle and Consumer Devices businesses. Revenues were up 4% to $3.6 billion. This uptick was driven by robust cloud and consumer-related end markets.
Operating Details
Management highlighted ongoing margin expansion, which was driven by a favorable mix and increased efficiency across both its business units.
Non-GAAP gross margin expanded 150 basis points (bps) year over year to 9.3% in the reported quarter.
Non-GAAP operating income came in at $399 million, up from the prior-year level of $314 million. Non-GAAP operating margin expanded 120 bps to 6.1%. This was fueled by robust gross margin performance and sustained cost efficiency.
The adjusted operating margins of the Flex Reliability Solutions Group were 6.7%, up 130 bps from the prior-year level. The adjusted operating margins of the Flex Agility Solutions Group improved 120 bps to 6.3%.
Selling, general & administrative expenses totaled $241 million, up 17.6% year over year.
Balance Sheet & Cash Flow
As of Dec. 31, 2024, cash & cash equivalents and long-term debt (net of current portion) were $2.31 billion and $3.15 billion, respectively, compared with $2.47 billion and $3.26 billion a year ago.
The company generated a third-quarter fiscal 2025 cash flow from operating activities of $413 million and an adjusted free cash flow of $306 million.
In the quarter, the company repurchased $200 million worth of stock, amounting to nearly 5.5 million shares. As of Dec. 31, 2024, FLEX repurchased shares worth $950 million.
Outlook
For the fourth quarter of fiscal 2025, Flex expects revenues to be between $6 billion and $6.4 billion. Management expects adjusted earnings of 65-73 cents per share, excluding 5 cents for net restructuring charges, 8 cents for stock-based compensation expense and 4 cents for net intangible amortization. Adjusted operating income is projected to be between $360 million and $400 million.
For the Reliability Solutions business, management forecasts sales to remain flat to down mid-single digits owing to softness in the automotive vertical. Agility Solutions’ revenues are anticipated to be flat to up mid-single digits, with steady growth expected in cloud markets.
Driven by consistent sturdy performance in a dynamic market, Flex now expects revenues to be between $25.4 billion and $25.8 billion for fiscal 2025. Earlier it projected revenues in the $24.9-$25.5 billion band.
It now anticipates adjusted earnings in the range of $2.57-$2.65 per share, excluding 28 cents for stock-based compensation expense, 15 cents for net intangible amortization and 12 cents for net restructuring charges. Earlier EPS projections ranged from $2.39 to $2.51.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 7.02% due to these changes.
VGM Scores
Currently, Flex has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 A. 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 these revisions 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.