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Flex Ltd. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

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Simply Wall St
·4 min read
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Flex Ltd. (NASDAQ:FLEX) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$6.7b, some 7.8% above estimates, and statutory earnings per share (EPS) coming in at US$0.41, 52% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Flex

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earnings-and-revenue-growth

Following the latest results, Flex's seven analysts are now forecasting revenues of US$23.9b in 2022. This would be a reasonable 2.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 39% to US$1.12. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$23.9b and earnings per share (EPS) of US$1.11 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The consensus price target rose 8.5% to US$21.86despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Flex's earnings by assigning a price premium. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Flex at US$23.00 per share, while the most bearish prices it at US$18.00. This is a very narrow spread of estimates, implying either that Flex is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that Flex is forecast to grow faster in the future than it has in the past, with revenues expected to grow 2.3%. If achieved, this would be a much better result than the 0.1% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 7.4% per year. Although Flex's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Flex going out to 2023, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Flex (1 shouldn't be ignored) you should be aware of.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.