Shares of Flextronics International Ltd (FLEX) reached a new 52-week high of $7.39 on Thursday, May 16, 2013. The bullish run reflects Flextronics new initiatives of divesting non-core assets and deployment of new technologies. New programs are expected to boost production volumes by early fiscal 2014.
The closing price of Flextronics on May 16 was $7.22, representing a strong one-year return of about 10.2% and a year-to-date return of about 13.2%. The S&P 500 jumped 27.4% and 12.9%, respectively during the same period. Average volume of shares traded over the last three months stands at approximately 4354.5K.
Flextronics delivered a positive earnings surprise of 15.1% over the past four quarters. This Zacks Rank #3 (Hold) stock has a market cap of $4.78 billion and a long-term expected earnings growth rate of 12.0%.
Modest 4Q Results, Upbeat Guidance
Flextronics reported fourth quarter earnings of 12 cents per share that matched the Zacks Consensus Estimate but declined from 22 cents reported in the year-ago quarter.
Revenues declined 17.0% from the year-ago quarter to $5.30 billion, slightly short of the Zacks Consensus Estimate of $5.45 billion. The year-over-year decline in revenues was due to the winding down of the assembly business with Research In Motion (BBRY).
For the first quarter, Flextronics forecast adjusted earnings in the range of 12 cents to 16 cents per share. Total revenue is expected in the range of $5.3 billion to $5.6 billion.
Key Growth Catalysts
We believe that new program wins and acquisition of Google’s (GOOG) Motorola manufacturing unit in Brazil and Tianjin China will drive growth in Flextronics key revenue segments (Industrial and Emerging Industries & High Velocity Solutions) in the near term.
However, profitability is expected to remain weak due to continuing investments in the near term. Additionally, macroeconomic concerns and weak end-market demand are major concerns. Moreover, the portfolio realignment is expected to hurt Flextronics’ top-line growth in the near term.
The Zacks Consensus Estimate moved down a couple of cents to 12 cents over the past 30 days, reflecting the near-term concerns. For fiscal 2014, the earnings estimate remained steady at 76 cents per share over the past 30 days.
Other Stocks to Consider
Another stock, which provides electronic manufacturing services and is worth considering is Sanmina Corp. (SANM) with a Zacks Rank #2 (Buy).
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