A month has gone by since the last earnings report for Plexus Corp. PLXS. Shares have added about 7.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 catalysts.
Plexus Q1 Earnings Beat, Revenues Miss Estimates
Plexus reported first-quarter fiscal 2017 adjusted earnings of $0.82 per share, which beat the Zacks Consensus Estimate of $0.76 and grew 74.5% year over year. However, revenues of $635 million, despite 3% growth year over year, fell short of the Zacks Consensus Estimate of $649.2 million.Continued weakness in the Communications sector was a major factor.
Revenues from the Communications sector (20.6% of total revenue) plummeted 16.6% year over year to $131 million.
Healthcare/Life Sciences (33.2%) revenues were up 10.5% from the year-ago quarter to $211 million.
Industrial/Commercial (32.4%) revenues increased 19.1% year over year to $206 million.
Defense/Security/Aerospace segment (13.7%) revenues fell 9.4% on a year-over-year basis to $87 million.
During the quarter, the company won 51 manufacturing solutions programs for which it anticipates approximately $217 million in annualized revenues once production commences.
Region-wise, the company’s revenues from both Americas and Asia Pacific increased 3.3% on a year-over-year basis. Nonetheless, Plexus’ revenues from Europe, Middle East, and Africa regions were almost down 7.1% year over year to $39 million.
Margins
Plexus reported adjusted operating profit of $33.9 million in the quarter, up 47.2% year over year. Adjusted operating margin increased 160 basis points year over year to 5.3%.
Balance Sheet & Cash Flow
Plexus exited the fiscal with cash & cash equivalents worth $496.5 million compared with $432.9 million as of Oct 31, 2016. The company had long-term debt and capital lease obligations of about $184.1 million compared with $184 million as of Oct 31, 2016.
For the quarter, the company generated $79.5 million in cash flow from operations in the quarter and used $7 million for capital expenditures. Free cash flow came in at about $72.5 million. Share repurchases for the quarter amounted to $7 million.
Outlook
For the second quarter of fiscal 2017, revenues are projected in a range of $620 million - $650 million. GAAP earnings are projected within $0.71 to $0.79 per share. Free cash flow is expected to be in the range of breakeven to $20 million for the second quarter.
For Healthcare/Life Sciences segment, management expects revenues to be flat sequentially as recovery is pacing following Typhoon Xiamen. Whereas delay in orders from an important client will mar revenues in the Industrial/Commercial segment in the current quarter. Revenues will be down in mid single digits. Communication segment revenues will be down in mid single digits too. However, new program ramps will aid Defense/Security/Aerospace segment revenues which are expected to be up in mid teens.
For fiscal 2017, capex is expected to be in the band of $50 to $60 million and free cash flow is expected to be $100 million.
How Have Estimates Been Moving Since Then?
Following the release , investors have witnessed an upward trend in fresh estimates. There have been two upward revisions for the current quarter
Plexus Corp. Price and Consensus
Plexus Corp. Price and Consensus | Plexus Corp. Quote
VGM Scores
At this time, Plexus's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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