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Plexus (PLXS) Beats Q1 Earnings Estimates, Revenues Up Y/Y

Zacks Equity Research

Plexus PLXS reported first-quarter fiscal 2019 adjusted earnings of 91 cents per share, which beat the Zacks Consensus Estimate by a penny. The figure rose 21.3% year over year.

Revenues of $766 million missed the consensus mark of $769 million but increased 13.1% on a year-over-year basis. Strong performance of Healthcare/Life Sciences segment among all the end-markets drove top-line growth.

Segment Details

Healthcare/Life Sciences revenues (39.3% of revenues) were up nearly 27% from the year-ago quarter to $301 million.

Industrial/Commercial revenues (28.6% of revenues) were up 5.8% year over year to $219 million.

Defense/Security/Aerospace segment revenues (16.1%) grew 23% on a year-over-year basis to $123 million.

Revenues from the Communications sector (16.1%) declined 7.5% year over year to $123 million.

Region-wise, revenues from the Americas (AMER) increased 18.4% from the year-ago quarter to $354 million. Revenues from the Asia Pacific region (APAC) rose 9.2% to $378 million. Revenues from Europe, the Middle East and Africa (EMEA) totaled $73 million, up 14.1% year over year.

Plexus Corp. Price, Consensus and EPS Surprise

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

Contract Wins

Plexus won 33 manufacturing contracts during the quarter worth $230 million in annualized revenues. Manufacturing wins contributed $920 million in annualized revenues in the trailing four quarters.

Notably, the top 10 customers of the company together accounted for 59% of net revenues, which stayed flat sequentially.

Operating Details

Adjusted gross margin increased 10 basis points (bps) on a year-over-year basis to 9.5% in the first quarter.

Reported selling and administrative expenses (4.6% of revenues) increased 10.6% from the year-ago quarter to approximately $35.4 million.

Plexus reported adjusted operating income of $36.9 million, up 16.8% year over year. Adjusted operating margin increased 10 bps on a year-over-year basis to 4.8%.

Return on Invested Capital (ROIC) in the first quarter of fiscal 2019 was 14.6%

Balance Sheet & Cash Flow

Plexus exited the first quarter with cash & cash equivalents worth $188.8 million compared with $297.3 million in fourth-quarter fiscal 2018.

In the fiscal first quarter, the company used cash of $33.3 million for operations and $24.9 million for capital expenditures, resulting in negative free cash flow of $58.2 million. In fourth-quarter fiscal 2018, the company had positive free cash flow of $14.7 million.

At the end of the first quarter, it had long-term debt of $187.6 million, significantly up from $183 million in the fourth quarter. Share repurchases for the quarter amounted to $50.1 million.

Outlook

For the second quarter of fiscal 2019, revenues are projected in the range of $760 million and $800 million. Operating margin is expected to be in the band of 4.3% and 4.7% for second-quarter fiscal 2019.

Plexus expects non-operating expenses to increase $1.6 million sequentially in the second quarter of fiscal 2019. This increase in expenses will likely be due to additional interest expense from borrowings and capital lease starting on the company’s new facility in Guadalajara, Mexico. The company also expects operating margin to slightly decline due to seasonal cost pressure.

The company expects GAAP earnings in the range of 80 cents and 90 cents for the second quarter of fiscal 2019 on the back of program wins. The new wins are expected to offset weakness in the semiconductor capital equipment market.

Zacks Rank & Stocks to Consider

Plexus currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader computer and technology sector include SS&C Technologies Holdings, Inc. SSNC, Twitter, Inc. TWTR and Cloudera, Inc. CLDR. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Expected long-term earnings growth rate for SS&C Technologies, Twitter and Cloudera are 13.5%, 22.1% and 8%, respectively.

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