Why Is Plexus (PLXS) Down 7.3% Since The Last Earnings Report?

A month has gone by since the last earnings report for Plexus Corp. (NASDAQ:PLXS) . Shares have lost about 7.3% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Plexus Q2 Earnings Beat, Revenues Miss Estimates

Plexus reported second-quarter fiscal 2017 adjusted earnings of $0.84 per share, which beat the Zacks Consensus Estimate of $0.76 and grew 52.7% year over year. However, revenues of $604.3 million declined 2.3% year over year and missed the Zacks Consensus Estimate of $634.3 million.

Revenues from the Communications sector (18% of total revenue) plummeted 31.2% year over year to $108 million.

Healthcare/Life Sciences (34%) revenues were up 7.9% from the year-ago quarter to $205 million.

Industrial/Commercial (32%) revenues increased 13.6% year over year to $192 million.

Defense/Security/Aerospace segment (16%) revenues fell 3.9% on a year-over-year basis to $99 million.

Region-wise, the company’s revenues from Americas decreased 17.6% to $272 million. However, revenues from Asia Pacific increased 14.4% to $310 million on a year-over-year basis. Nonetheless, Plexus’ revenues of $44 million from Europe, Middle East, and Africa regions remained the same year over year.

Margins

Plexus reported adjusted operating profit of $32.6 million in the quarter, up 28.9% year over year. Adjusted operating margin increased 130 basis points year over year to 5.4%.

Balance Sheet & Cash Flow

Plexus exited the fiscal with cash & cash equivalents worth $524.5 million compared with $432.9 million as of Oct 1, 2016. The company had long-term debt and capital lease obligations of about $185.6 million compared with $184 million as of Oct 1, 2016.

For the quarter, the company generated $26.2 million in cash flow from operations and used $7.7 million for capital expenditures. Free cash flow came in at about $18.5 million. Share repurchases for the quarter amounted to $6.8 million.

Outlook

For the third quarter of fiscal 2017, revenues are projected in the range of $595 million - $625 million. GAAP earnings are projected within $0.68 to $0.76 per share. Operating margin is expected to be 4.7% to 5%. Free cash flow is expected to be $20 million in the third quarter.

For Health/Life sciences Sector, management expects growth to be in mid single-digits driven by increasing end market demand and new wins.

For Industrial/Commercial sector, revenues will be flat year over year in the third quarter.

Communications sector will be marred by softening end market demand as well as timing of new product launches. Revenues will be down in low teens in the current quarter.

Defense/Security and Aerospace bolstered by increasing end market demand and new program wins will see revenues up in mid single digits sequentially.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Plexus' stock has a great Growth Score of 'A', though it is lagging on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

The stock has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.