Plexus Corp. PLXS reported fourth-quarter and fiscal 2015 results. Quarterly adjusted earnings of 69 cents per share beat the Zacks Consensus Estimate of 68 cents. However, earnings declined 11.5% from the year-ago figure of 78 cents.

For fiscal 2015, the company reported adjusted earnings of 2.78 per share (excludes stock-based compensation expense of 39 cents), an increase of 1.8% from fiscal 2014.

Revenues

Revenues inched up 0.4% year over year to $668.7 million and came ahead of the Zacks Consensus Estimate of $666 million. Sales were within the company’s guidance of $650 million to $680 million. For fiscal 2015, revenues came in at $2.7 billion, up 11.6% from last year.

Revenues from the Networking/Communications sector (27% of total revenue) plummeted 23.5% year over year to $179 million.

Healthcare/Life Sciences (27%) revenues decreased 3.2% from the year-ago quarter to $183 million.

Industrial/Commercial (30%) surged 34% year over year to $201 million.

Defense/Security/Aerospace segment (16%) revenues increased 14% on a year-over-year basis to $106 million.

During the quarter, the company won 34 programs for which it anticipates approximately $167 million in annualized revenues once production commences.

Region-wise, the company’s revenues from Americas declined 2.8% year over year in the quarter. Nonetheless, Plexus’ revenues increased in Asia-Pacific (6.1%) and Europe, Middle East, and Africa regions (45.4%).

Margins

Plexus reported adjusted operating profit of $28.6 million, a decline of 10.9% year over year while adjusted operating margin declined 50 basis points year over year to 4.3%.

Balance Sheet & Cash Flow

Plexus exited the fiscal with cash & cash equivalents worth $357.1 million compared with $346.6 million in 2014. The company had long-term debt and capital lease obligations of $259.3 million, lower than $262 million at the end of 2014.

The company generated $21 million in cash flow from operations in the fourth quarter and used $8.2 million for capital investment during the quarter, resulting in positive free cash flow of $12.8 million.

Outlook

For the first quarter of fiscal 2016, revenues are projected in the range of $600 million - $625 million. Earnings are projected within 41 to 48 cents per share.

Our Take

We believe new program wins along with global expansion will drive growth over the long term. 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, Celestical Inc. CLS and Flextronics FLEX remain headwinds. Additionally, the company expects weakness in the Networking/Communications and Industrial/Commercial markets to impact the business in the near term.

Currently, Plexus has a Zacks Rank #3 (Hold).

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