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Why Is Plexus (PLXS) Up 7.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Plexus (PLXS - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Plexus due for a pullback? 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.

Plexus Q2 Earnings Beat Estimates, Revenues Fall Y/Y

Plexus reported second-quarter fiscal 2020 adjusted earnings of 61 cents per share that beat the Zacks Consensus Estimate by 13%. However, the figure declined 22.8% year over year.

Revenues of $767 million beat the consensus mark by 4.5%. However, the figure declined 2.8% year over year due to weakness in Communication and Healthcare/Life Sciences sectors and lower Americas (AMER) revenues.

Asia-Pacific (APAC) revenues increased 2.6% year over year to $388 million. However, Europe, the Middle East and Africa (EMEA) revenues declined 2.6% to $74 million and Americas revenues declined 8.2% to $334 million, respectively.

Plexus won 36 manufacturing contracts during the quarter, worth $248 million in annualized revenues. Trailing four-quarter manufacturing wins totaled $844 million in annualized revenues.
 
Market Sector Details

Industrial/Commercial revenues grew 14.8% year over year to $287 million and accounted for 37.4% of total revenues.

Aerospace/Defense revenues increased 12.1% year over year to $157 million and accounted for 20.5% of total revenues.

However, Healthcare/Life Sciences revenues declined 9.7% from the year-ago quarter to $271 million. The sector accounted for 35.3% of total revenues.

Communications accounted for 6.8% of total revenues. Revenues from the sector decreased 47.5% year over year to $52 million.

Notably, the top 10 customers of the company accounted for 56% of net revenues.

Operating Details

Gross profit declined 13% year over year to $61.4 million. Gross margin contracted 90 basis points (bps) year over year to 8%.

Selling and administrative expenses (5% of revenues) increased 2.1% from the year-ago quarter to approximately $38.2 million.

Plexus reported adjusted operating income of $23.2 million, down 30% year over year. Adjusted operating margin contracted 120 bps on a year-over-year basis to 3%.

Balance Sheet & Cash Flow

As of Apr 4, 2020, Plexus had cash & cash equivalents worth $225.8 million compared with $252.9 million as of Jan 4, 2020.

Moreover, as of Apr 4, 2020, the company had a long-term debt of $186.3 million compared with $186.8 million as of Jan 4, 2020.

In second-quarter fiscal 2020, cash flow used by operations was $29.3 million. The company reported negative free cash flow of $46.3 million.

Further, the company repurchased shares worth $13.2 million at an average price of $58.57 per share.

ROIC (tax-effected annualized adjusted operating income divided by average invested capital over two quarters) was 11.4% for second-quarter fiscal 2020. Plexus’ weighted average cost of capital for fiscal 2020 was 8.8%.

Guidance

For third-quarter fiscal 2020, revenues are projected between $790 million and $830 million.

Additionally, Plexus expects GAAP earnings between 72 cents and 82 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.13% due to these changes.

VGM Scores

At this time, Plexus has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Plexus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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