A month has gone by since the last earnings report for Plexus (PLXS). Shares have added about 7.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Plexus 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 drivers.
Plexus Q4 Earnings Beat Estimates, Revenues Up Y/Y
Plexus fourth-quarter fiscal 2019 adjusted earnings of 93 cents per share that beat the Zacks Consensus Estimate by seven cents but decreased 3.1% year over year.
Revenues of $810 million beat the consensus mark of $778 million and increased 5.1% year over year. Strong revenues from Aerospace/Defense, Industrial/Commercial and Healthcare/Life Sciences sectors drove the top line.
Americas (AMER) revenues increased 7.5% year over year to $344 million. Europe, the Middle East and Africa (EMEA) revenues totaled $81 million, up 17.4% year over year. However, Asia-Pacific (APAC) revenues declined 0.5% to $416 million.
Plexus won 35 manufacturing contracts during the quarter, worth $202 million in annualized revenues. Trailing four-quarter manufacturing wins totaled $907 million in annualized revenues.
Market Sector Details
Healthcare/Life Sciences revenues rose 7.6% from the year-ago quarter to $311 million. The sector accounted for 38.4% of total revenues.
Industrial/Commercial revenues grew 8.2% year over year to $264 million and accounted for 32.6% of total revenues.
Aerospace/Defense revenues jumped 45% to $174 million and accounted for 21.5% of total revenues.
Communications accounted for 7.5% of total revenues. Revenues from the sector decreased 48.3% year over year to $61 million.
Notably, the top 10 customers of the company accounted for 51% of net revenues.
Gross profit increased 6.1% year over year to $77.8 million. Moreover, gross margin expanded 10 basis points (bps) year over year to 9.6%.
Selling and administrative expenses (4.8% of revenues) increased 6.2% from the year-ago quarter to approximately $38.6 million.
Plexus reported adjusted operating income of $39.2 million, up 6.1% year over year. However, adjusted operating margin was flat on a year-over-year basis at 4.8%.
Balance Sheet & Cash Flow
As of Sep 28, 2019, Plexus had cash & cash equivalents worth $226.3 million compared with $198.4 million as of Jun 30, 2019.
Moreover, as of Sep 28, 2019, the company had a long-term debt of $187.3 million compared with $187.6 million as of Jun 30, 2019.
In fourth-quarter fiscal 2019, Plexus generated a free cash flow of $92 million.
Further, the company repurchased shares worth $31.4 million at an average price of $58.38 per share.
ROIC (tax-effected annualized adjusted operating income divided by average invested capital over five quarters) was 13.1% for both the fourth quarter and fiscal 2019. Plexus’ weighted average cost of capital for fiscal 2019 was 9%.
For first-quarter fiscal 2020, revenues are projected between $780 million and $820 million. Additionally, Plexus expects GAAP earnings between 87 cents and 97 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.9% due to these changes.
Currently, Plexus has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Plexus has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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