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Plexus (PLXS) Q2 Earnings Beat, Revenues Miss Estimates

Zacks

Plexus Corp (PLXS) reported second-quarter fiscal 2017 adjusted earnings of 84 cents per share, which beat the Zacks Consensus Estimate of 76 cents and grew 52.7% year over year. However, revenues of $604.3 million declined 2.3% year over year and missed the Zacks Consensus Estimate of $634.3 million.

Revenues from the Communications sector (18% of total revenue) plummeted 31.2% year over year to $108 million.

Healthcare/Life Sciences (34%) revenues were up 7.9% from the year-ago quarter to $205 million.

Industrial/Commercial (32%) revenues increased 13.6% year over year to $192 million.


Defense/Security/Aerospace segment (16%) revenues fell 3.9% on a year-over-year basis to $99 million.

Plexus Corp. Price, Consensus and EPS Surprise

Plexus Corp. Price, Consensus and EPS Surprise | Plexus Corp. Quote

Region-wise, the company’s revenues from Americas decreased 17.6% to $272 million. However, revenues from Asia Pacific increased 14.4% to $310 million on a year-over-year basis. Nonetheless, Plexus’ revenues of $44 million from Europe, Middle East, and Africa regions remained the same year over year.

Margins

Plexus reported adjusted operating profit of $32.6 million in the quarter, up 28.9% year over year. Adjusted operating margin increased 130 basis points year over year to 5.4%.

Balance Sheet & Cash Flow

Plexus exited the fiscal with cash & cash equivalents worth $524.5 million compared with $432.9 million as of Oct 1, 2016. The company had long-term debt and capital lease obligations of about $185.6 million compared with $184 million as of Oct 1, 2016.

For the quarter, the company generated $26.2 million in cash flow from operations and used $7.7 million for capital expenditures. Free cash flow came in at about $18.5 million. Share repurchases for the quarter amounted to $6.8 million.

Outlook

For the third quarter of fiscal 2017, revenues are projected in the range of $595 million – $625 million. GAAP earnings are projected within 68 to 76 cents per share.

Our Take

We believe new program wins along with global expansion will drive growth over the long term. Plexus announced that opportunities from qualified manufacturing reached $3 billion revenue run rate in the quarter. 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, Celestica Inc. CLS and Flextronics FLEX remain headwinds. Additionally, the company expects weakness in the Communications market to impact the business in the near term.

Over the past one year, shares increased 50.8% compared with the Zacks categorized Electronic Manufacturing Services (EMC) industry's gain of 44.5%.

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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