Plexus Corp. PLXS reported second-quarter fiscal 2015 non-GAAP earnings per share (EPS) of 69 cents that came in line with the Zacks Consensus Estimate. The company’s earnings increased from the year-ago figure of 60 cents and were within management guidance of 64–72 cents.
Revenues
Revenues increased 16.8% year over year to $651 million and beat the Zacks Consensus Estimate of $645 million. The year-over-year rise was primarily attributable to robust performance by all segments. Revenues came within management’s guided range of $630.0 to $660.0 million.
Revenues from the Networking/Communications sector (32% of total revenue) increased 30% year over year to $210 million.
Healthcare/Life Sciences (29%) revenues increased 14.4% from the year-ago quarter to $191 million.
Industrial/Commercial (25%) increased 10.3% year over year to $148 million.
The Defense/Security/Aerospace segment (14%) rebounded in the quarter with revenues increasing 7.1% on a year-over-year basis to $90 million.
During the quarter, the company won 25 programs in its Manufacturing Solutions group. Plexus anticipates these wins to generate approximately $209 million in annualized revenues once production commences.
Geography-wise, the Americas and the Asia-Pacific accounted for 95% of the total revenue while Europe, Middle East, and Africa contributed the remaining 5%.
Margins
Plexus reported adjusted operating profit of $29.5 million, up 55% year over year. However, adjusted operating margin remained flat at 4.5%.
Balance Sheet & Cash Flow
Plexus exited the quarter with cash & cash equivalents worth $356.3 million compared with $346.5 million in 2014. The company had long-term debt and capital lease obligations of $260 million, lower than $262 million in 2014. The company used $131 million in cash flow from operations and $7 million for capital investment during the second quarter, resulting in negative free cash flow of $124 million.
Share Repurchase Program
During the quarter, the company repurchased $7.7 million shares under its $30 million share repurchase program.
Outlook
For the third quarter of fiscal 2015, revenues are projected in the range of $670 to $700 million. Earnings are projected within 71 to 79 cents per share, including 10 cents per share of stock-based compensation expense but excluding any unanticipated special items. The Zacks Consensus Estimate is pegged at 76 cents. Operating margin is expected in the range of 4.5–4.8%.
Our Take
We believe the new program wins in the networking/communications, industrial/commercial and healthcare/life sciences sectors and global expansion will drive growth over the long term. Moreover, the disengagement from Juniper JNPR is expected to improve the product mix. Additionally, the consolidation of the company’s production facilities in low-cost areas is expected to boost margins, going forward.
However, a mature electronic manufacturing services market and intense competition from the likes of Jabil Circuit JBL and Flextronics FLEX remain the headwinds.
Currently, Plexus has a Zacks Rank #3 (Hold).
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