We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Flex Offset Automotive Headwinds in Its Reliability Segment?
Read MoreHide Full Article
Key Takeaways
Flex's Reliability Solutions revenues rose 3% to $3B, amid ongoing automotive weakness.
Margin strength came from Power and execution, lifting adjusted operating margin to 6.5%.
Flex sees low- to mid-single digits Reliability growth, with auto and renewables still soft but stabilizing.
Flex Ltd. (FLEX - Free Report) is witnessing strong business performance, largely driven by surging demand across its data center and high-value, technology-driven businesses. Even as momentum builds across other sectors, the question arises whether Flex can offset persistent auto-sector weakness within its Reliability Solutions segment.
In the last reported quarter, revenues from Reliability Solutions Group (which encompasses Health Solutions, Automotive and Industrial businesses) grew 3% to $3 billion, accounting for 45% of net sales. This was driven by strong Power growth and moderate gains in Health Solutions and Core Industrial, partially offset by ongoing weakness in the automotive sector.
Management acknowledged that automotive remains a pressure point but is gradually stabilizing. It highlighted compute deals with new logos in software-defined vehicles in the fiscal first half.
The adjusted operating margins of the division was 6.5%, up 105 bps from the prior-year level. This margin strength, driven mainly by a favorable mix (from the Power business), cost management and disciplined execution, demonstrates that the segment can flex around cyclical weakness in auto without affecting overall profitability.
Looking ahead, Flex expects Reliability Solutions revenues to grow in the low- to mid-single digits, supported by strong power demand and accelerating growth in medical devices in fiscal 2026. However, a soft but stabilizing environment in renewables and auto will remain a concern, added management.
Whether Flex can continue offsetting this pressure depends largely on the durability of data center demand. With revenues expected to rise at least 35% this year, the data center segment is delivering not just rapid expansion but also significant mix benefits. Flex’s diversification across mission-critical industrial and healthcare verticals also reduces reliance on any single end market, including automotive.
Let’s Look at Challenges Faced by FLEX’s Rivals
Jabil (JBL - Free Report) is positioned to gain from AI-driven data center expansion, higher demand for advanced cooling solutions and semiconductor capital equipment. Long-term tailwinds in health care, renewables and energy infrastructure and vehicle-agnostic automotive platforms support sustained growth.
At the same time, Jabil faces meaningful challenges. The Connected Living & Digital Commerce segment is being impacted by weakness in consumer-driven products. Automotive demand remains volatile amid regulatory shifts, tariffs and trade pressures (mainly around Chinese EVs) and a slower EV ramp. Renewables face policy uncertainty, tariffs and higher interest rates that impact near-term demand.
The growing proliferation of AI-based applications and generative AI tools across industries presents a solid growth opportunity for Celestica (CLS - Free Report) . AI investments are driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, data center interconnects, edge solutions, and servers and storage-related products.
Weakness in the ATS segment over the past few quarters is a concern. CLS added that its “reshaping activities” in A&D are offsetting strong base demand across the segment. As a result, revenues are expected to be flat year over year in 2025. Customer concentration risk and macroeconomic challenges remain headwinds.
Image: Bigstock
Can Flex Offset Automotive Headwinds in Its Reliability Segment?
Key Takeaways
Flex Ltd. (FLEX - Free Report) is witnessing strong business performance, largely driven by surging demand across its data center and high-value, technology-driven businesses. Even as momentum builds across other sectors, the question arises whether Flex can offset persistent auto-sector weakness within its Reliability Solutions segment.
In the last reported quarter, revenues from Reliability Solutions Group (which encompasses Health Solutions, Automotive and Industrial businesses) grew 3% to $3 billion, accounting for 45% of net sales. This was driven by strong Power growth and moderate gains in Health Solutions and Core Industrial, partially offset by ongoing weakness in the automotive sector.
Management acknowledged that automotive remains a pressure point but is gradually stabilizing. It highlighted compute deals with new logos in software-defined vehicles in the fiscal first half.
Flex Ltd. Price, Consensus and EPS Surprise
Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote
The adjusted operating margins of the division was 6.5%, up 105 bps from the prior-year level. This margin strength, driven mainly by a favorable mix (from the Power business), cost management and disciplined execution, demonstrates that the segment can flex around cyclical weakness in auto without affecting overall profitability.
Looking ahead, Flex expects Reliability Solutions revenues to grow in the low- to mid-single digits, supported by strong power demand and accelerating growth in medical devices in fiscal 2026. However, a soft but stabilizing environment in renewables and auto will remain a concern, added management.
Whether Flex can continue offsetting this pressure depends largely on the durability of data center demand. With revenues expected to rise at least 35% this year, the data center segment is delivering not just rapid expansion but also significant mix benefits. Flex’s diversification across mission-critical industrial and healthcare verticals also reduces reliance on any single end market, including automotive.
Let’s Look at Challenges Faced by FLEX’s Rivals
Jabil (JBL - Free Report) is positioned to gain from AI-driven data center expansion, higher demand for advanced cooling solutions and semiconductor capital equipment. Long-term tailwinds in health care, renewables and energy infrastructure and vehicle-agnostic automotive platforms support sustained growth.
At the same time, Jabil faces meaningful challenges. The Connected Living & Digital Commerce segment is being impacted by weakness in consumer-driven products. Automotive demand remains volatile amid regulatory shifts, tariffs and trade pressures (mainly around Chinese EVs) and a slower EV ramp. Renewables face policy uncertainty, tariffs and higher interest rates that impact near-term demand.
The growing proliferation of AI-based applications and generative AI tools across industries presents a solid growth opportunity for Celestica (CLS - Free Report) . AI investments are driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, data center interconnects, edge solutions, and servers and storage-related products.
Weakness in the ATS segment over the past few quarters is a concern. CLS added that its “reshaping activities” in A&D are offsetting strong base demand across the segment. As a result, revenues are expected to be flat year over year in 2025. Customer concentration risk and macroeconomic challenges remain headwinds.
Flex Price Performance, Valuation and Estimates
Shares of FLEX have gained 19.5% in the past month compared with the Electronics - Miscellaneous Products industry’s growth of 10.1%.
Image Source: Zacks Investment Research
FLEX trades at a forward 12-month price-to-earnings (P/E) ratio of 21.09, below the industry’s 25.53.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for FLEX earnings for fiscal 2026 has been revised upward over the past 60 days.
Image Source: Zacks Investment Research
FLEX currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.