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Plexus (PLXS) Q2 Earnings Beat Estimates, Revenues Fall Y/Y

Zacks Equity Research
·4 mins read

Plexus PLXS reported second-quarter fiscal 2020 adjusted earnings of 61 cents per share that beat the Zacks Consensus Estimate by 13%. However, the figure declined 22.8% year over year.

Revenues of $767 million beat the consensus mark by 4.5%. However, the figure declined 2.8% year over year due to weakness in Communication and Healthcare/Life Sciences sectors and lower  Americas (AMER) revenues.

Asia-Pacific (APAC) revenues increased 2.6% year over year to $388 million. However, Europe, the Middle East and Africa (EMEA) revenues declined 2.6% to $74 million and Americas revenues declined 8.2% to $334 million, respectively.

Plexus won 36 manufacturing contracts during the quarter, worth $248 million in annualized revenues. Trailing four-quarter manufacturing wins totaled $844 million in annualized revenues.
 
Market Sector Details

Industrial/Commercial revenues grew 14.8% year over year to $287 million and accounted for 37.4% of total revenues.

Aerospace/Defense revenues increased 12.1% year over year to $157 million and accounted for 20.5% of total revenues.

Plexus Corp. Price, Consensus and EPS Surprise

Plexus Corp. Price, Consensus and EPS Surprise
Plexus Corp. Price, Consensus and EPS Surprise

Plexus Corp. price-consensus-eps-surprise-chart | Plexus Corp. Quote

However, Healthcare/Life Sciences revenues declined 9.7% from the year-ago quarter to $271 million. The sector accounted for 35.3% of total revenues.

Communications accounted for 6.8% of total revenues. Revenues from the sector decreased 47.5% year over year to $52 million.

Notably, the top 10 customers of the company accounted for 56% of net revenues.

Operating Details

Gross profit declined 13% year over year to $61.4 million. Gross margin contracted 90 basis points (bps) year over year to 8%.

Selling and administrative expenses (5% of revenues) increased 2.1% from the year-ago quarter to approximately $38.2 million.

Plexus reported adjusted operating income of $23.2 million, down 30% year over year. Adjusted operating margin contracted 120 bps on a year-over-year basis to 3%.

Balance Sheet & Cash Flow

As of Apr 4, 2020, Plexus had cash & cash equivalents worth $225.8 million compared with $252.9 million as of Jan 4, 2020.

Moreover, as of Apr 4, 2020, the company had a long-term debt of $186.3 million compared with $186.8 million as of Jan 4, 2020.

In second-quarter fiscal 2020, cash flow used by operations was $29.3 million. The company reported negative free cash flow of $46.3 million.

Further, the company repurchased shares worth $13.2 million at an average price of $58.57 per share.

ROIC (tax-effected annualized adjusted operating income divided by average invested capital over two quarters) was 11.4% for second-quarter fiscal 2020. Plexus’ weighted average cost of capital for fiscal 2020 was 8.8%.

Guidance

For third-quarter fiscal 2020, revenues are projected between $790 million and $830 million.

Additionally, Plexus expects GAAP earnings between 72 cents and 82 cents per share.

Zacks Rank & Stocks to Consider

Plexus currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Avid Technology, Inc. AVID, Netlist, Inc. NLST and Garmin Ltd. GRMN. While Avid Technology and Netlist sport a Zacks Rank #1 (Strong Buy), Garmin carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Avid, Netlist and Garmin is currently pegged at 20%, 15% and 7.35%, respectively.

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