Fabrinet Reaches a 52-Week High

Zacks

Shares of Fabrinet (FN) reached a new 52-week high of $20.74 on Tuesday, Dec 24, 2013. This was primarily driven by the company’s strong optical communications business and also its solid first-quarter 2014 results.

The closing price of this optical packaging and electronic manufacturing services provider on Dec 24 was $20.65. The price represented a robust one-year return of about 52.5% and a decent year-to-date return of around 58.7%. Average volume of shares traded over the last three months stood at approximately 155,375.

Fabrinet delivered positive earnings surprises in the last four quarters with an average beat of 15.6%. This Zacks Rank #1 (Strong Buy) company has a market cap of $717.3 million and a long-term expected earnings growth rate of 12.0%.

Fabrinet’s Strengths

Fabrinet’s Optical communications business one of its strongest and the company is a market leader in this segment. In the last reported quarter, this segment grew 12% sequentially and was a significant driver for the op line growth. Given the dramatic rise in demand for voice, data and video services delivered over wired and wireless Internet protocol, the demand for Fabrinet’s optical communications components has also been increasing.

The company has a strong Turn-Key Supply Chain Management System, whereby it has created a proprietary set of automated manufacturing resources planning tools. These tools are specially designed to address the unique inventory management demands of low-volume, high-mix manufacturing.

Over the years, Fabrinet has developed strong relations with suppliers and also implemented inventory management strategies with many of its suppliers. Thus the company can obtain inventory on an as-needed basis and provide on-site stocking programs. Hence, this system allows Fabrinet to lower both costs and cycle times for its customers.  

Strong Q1 Earnings

Fabrinet reported first-quarter fiscal 2014 earnings per share of 40 cents, 33.3% above the Zacks Consensus Estimate of 30 cents. Earnings also grew 11.1% year over year driven by strong pipeline of new businesses. 

Total revenue in the quarter increased 8.2% year over year to $171.6 million from $158.6 million in the year-ago quarter. The increment was primarily driven by rise in customer demand for the optical communications manufacturing services during the quarter.

Estimate Revisions

This apart, over the last 60 days, estimates for both 2014 and 2015 have been revised upward. This led to an 11.1% rise in the Zacks Consensus Estimate to $1.50 per share in 2014. For 2015, the Zacks Consensus Estimate advanced 10.7% to $1.66 per share.

Other Stocks to Consider

Other stocks in the electronics and miscellaneous components industry that are currently performing well and have a good visibility include AAC Technologies Holdings Inc. (AACAY), KEMET Corp. (KEM) and CalAmp Corp. (CAMP). AAC and KEMET have a Zacks Rank #1 while CalAmp carries a Zacks Rank #2 (Buy).

Read the Full Research Report on AACAY
Read the Full Research Report on FN
Read the Full Research Report on CAMP
Read the Full Research Report on KEM


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