Plexus Corp. PLXS) is set to report first-quarter fiscal 2017 results on Jan 18, after the market closes. Last quarter, the company reported a negative earnings surprise of 16.25%. Over the past four quarters, the company has posted an average positive earnings surprise of 1.06%. Let’s see how things are shaping up for this announcement.
Factors to Consider
We believe that a strong number of program wins is a big positive for the company. In the last reported quarter, Plexus won 37 programs worth approximately $200 million. For the first quarter, management expects revenues in the industrial & commercial sector to be down in a high single digits range due to a delay in orders from one customer. However, Plexus is seeing strength in its health care, industrial, commercial and defense/aerospace sectors.
Furthermore, the consolidation of the company’s production facilities in low-cost areas is expected to boost margins, going forward. The company’s restructuring of a couple of its facilities (in Fremont and Livingston) with regard to lower margin programs in networking/communications and industrial/commercial sectors and the replacement of its facility in Juarez with a new facility in Guadalajara is expected to lower its cost and boost profitability. Moreover, a robust shareholder return policy continues to be a big positive.
However, macroeconomic headwinds as well as softening end-market demand continue to remain big worries for Plexus. The company’s significant exposure to the slowing Networking and Communications industry also remains an added concern. The company also faces customer concentration risks. The top 10 customers accounted for 59% of the company’s revenues in fiscal 2016.
For the first quarter of fiscal 2017, revenues are projected in a range of $620 million - $650 million. Non GAAP earnings are projected within 74 cents to 82 cents per share.
Earnings Whispers
Our proven model does not conclusively show that Plexus is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see.
Zacks ESP: Plexus currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 76 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Plexus has a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Plexus Corp. Price and EPS Surprise
Plexus Corp. Price and EPS Surprise | Plexus Corp. Quote
Stocks That Warrant a Look
Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:
Axcelis Technologies Inc. ACLS with an Earnings ESP of +25.00% and a Zacks Rank #1.
Applied Optoelectronics Inc. AAOI with an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.