Plexus Corp. PLXS reported third-quarter fiscal 2015 non-GAAP earnings per share (EPS) of 69 cents that came in line with the Zacks Consensus Estimate and within the guided range of 67-70 cents. However, earnings declined from the year-ago figure of 74 cents.

Revenues

Revenues increased 8% year over year to $670 million but missed the Zacks Consensus Estimate of $675 million. However, revenues were in line with the company’s guidance. The year-over-year rise was primarily attributable to robust performance by all segments.

Revenues from the Networking/Communications sector (33% of total revenue) increased 9.4% year over year to $222 million.

Healthcare/Life Sciences (27%) revenues increased 1.7% from the year-ago quarter to $180 million.

Industrial/Commercial (26%) increased 14.3% year over year to $176 million.

The Defense/Security/Aerospace segment (14%) revenues increased 5.7% on a year-over-year basis to $92 million.

During the quarter, the company won 34 programs in its Manufacturing Solutions group. Plexus anticipates these wins to generate approximately $147 million in annualized revenues once production commences.

Region-wise, the Americas and the Asia-Pacific accounted for 95% of total revenue while Europe, Middle East, and Africa contributed the remaining 5%.

Margins

Plexus reported adjusted operating profit of $28.6 million, up 1.54% year over year. However, adjusted operating margin declined 40 basis points year over year to 4.3%.

Balance Sheet & Cash Flow

Plexus exited the quarter with cash & cash equivalents worth $354.8 million compared with $346.5 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 $15 million in cash flow from operations and used $10 million for capital investment during the third quarter, resulting in positive free cash flow of $5 million.

Share Repurchase Program

During the quarter, the company repurchased $7.5 million shares under its $333 million share repurchase program.

Outlook

For the fourth quarter of fiscal 2015, revenues are projected in the range of $650 million to $680 million. Earnings are projected within 64 to 72 cents per share. The Zacks Consensus Estimate is pegged at 74 cents. Operating margin is expected in the range of 4.2% to 4.5%.

Our Take

We believe 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 headwinds.

Currently, Plexus has a Zacks Rank #5 (Strong Sell).

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