Plexus Corp (PLXS) is scheduled to report its second quarter fiscal 2011 results on April 20, 2011after market closes. In the run-up to the earnings report, we do not witness any major variations in analyst estimates at this point.
Prior Quarter Overview
Plexus Corp. reported first quarter 2011 earnings of 61 cents per share, beating the Zacks Consensus Estimate by a penny. Earnings per share (EPS) increased 56.4% from year-ago quarter’s earnings of 39 cents. Sequentially, EPS fell 6.2% from 65 cents. EPS was in line with management’s guidance of 56 cents to 62 cents.
Total revenue in the quarter was $ 566.0 million, an increase of 31.6% from $ 430.4 million in the year-ago quarter. Sequentially, revenues increased 1.9%.
For further details, please refer to: Plexus Beats by a Penny.
Current Quarter Expectations
Plexus reduced its outlook for the next two quarters of 2011 due to significant headwinds as a result of a slow down in production for two unnamed customers, an increase in operating costs and a significant production delay for its customer, Coca-Cola Co. (KO). Plexus' weak revenue outlook weighs on its results for 2011.
For the current quarter of 2011, EPS is expected to be in the range of 53 cents to 58 cents, excluding restructuring charges but including 8 cents per share in stock-based compensation expenses. Presently, the Zacks Consensus Estimate for the quarter is a profit of 56 cents per share and is in line with management’s expectation.
Revenues for the second quarter are projected to be in the range of $ 540 million-$ 570 million, down 1.9% sequentially at the mid point. The Zacks Consensus Estimate is $ 567.0 million. Revenues are expected to slow down due to the ramp down of production for two significant customers that were acquired during the past year and an increase in operating costs.
For fiscal 2011, management anticipates revenues to grow in the range of 10%-13% from the 2010 level. This is below management’s long-term target of a compounded annual revenue growth of over 15% to 18%.
Agreement of Analysts
For the current quarter, out of the eight analysts covering the stock, only one analyst has revised the estimate upward while none of them had reduced estimates in the last thirty days. As a result, the EPS for the current quarter remained at 56 cents, the highest estimate being 57 cents and the lowest estimate was 55 cents.
For fiscal 2011, only one upward revision was made by an analyst (out of the eight analysts covering the stock) and as a result, the EPS estimate for fiscal 2011 increased by a penny from $ 2.22-$ 2.23 in the last thirty days.
Our Conclusion
We note that Plexus Corp. has consistently exceeded estimates over the preceding four quarters. The average surprise in the preceding 4 quarters is a positive 4.40%, and another positive earnings surprise can be expected from the company.
However, Plexus' weak revenue outlook will weigh on its 2011 results. Headwinds for the company include intense competition in the electronic manufacturing services (EMS) market from Flextronics International Ltd. (FLEX) and Jabil Circuit Inc. (JBL), small market share, continued component challenges and supply chain constraints.
We remain apprehensive about the company achieving its 2011 targets and expect revenues to be down given the poor operating performance. Thus, we have an Underperform rating on Plexus for the long term (6-12 months).
However, expansion of its global footprint, a healthy pipeline of program wins and improving end-market demand are long-term drivers for growth.
We currently have a Zacks #2 Rank for Plexus Corp., which translates into a Buy rating on the short term on the expectation of another earnings beat.
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