Plexus (PLXS) To Report Q3 Earnings: What's In The Cards?
Zacks Investment Research | Jul 16, 2017 10:37PM ET
Plexus Corp. (NASDAQ:PLXS) is set to report third-quarter fiscal 2017 results on Jul 19, after the closing bell. The company reported a positive earnings surprise of 10.53% in the last quarter. Further, it has delivered an average positive earnings surprise of 2.52% over the trailing four quarters.
Let’s see how things are shaping up for this announcement.
Factors to Consider
For third-quarter fiscal 2017, revenues are projected in the range of $595–$625 million. GAAP earnings are projected within 68–76 cents per share. GAAP operating margin is expected to be 4.8–5.2%.
For Healthcare/Life sciences Sector, management expects growth to be in mid-single digits driven by increasing end-market demand and new wins, while for Industrial/Commercial sector, revenues are anticipated to be flat year over year.
Communications sector is stated to be marred by softening end market demand as well as timing of new product launches, whereas Defense/Security/Aerospace, bolstered by increasing end-market demand and new program wins, is projected to see revenues up in mid-single digits sequentially.
We note that on a year-to-date basis Plexus’ shares have decreased 2.4%, underperforming the Zacks categorized Electronics Manufacturing Services industry’s gain of 16.7% over the same period.
This sluggish performance can be primarily attributed to the reduced end-market demand in the slowing Networking and Communications industry, which contributes significantly to the company’s top-line (approximately 23.4% of fiscal 2016 revenues).
Nevertheless, we believe that a healthy number of program wins is a big positive for the company. In the last reported quarter, Plexus won 26 programs worth approximately $202 million in its Manufacturing Solutions group and has added over $813 million in revenues in the trailing four quarters due to new wins. In addition, the company announced that qualified manufacturing opportunities reached $3 billion revenue run rate in the quarter.
Moreover, as an engineering-focused EMS player, Plexus is well-positioned to benefit from the increasing outsourcing trend among healthcare, industrial and defense/aerospace OEMs; given its exposure to high-growth segments, streamlining of operations and strong cash flow generation abilities.
Furthermore, the consolidation of the company’s production facilities in low-cost areas is expected to boost margins, going forward. Additionally, a robust shareholder return policy continues to drive the stock.
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