Flex Ltd FLEX reported second-quarter fiscal 2025 adjusted earnings per share (EPS) of 64 cents, surpassing the Zacks Consensus Estimate by 14.3%. The bottom line compared favorably with 57 cents posted in the prior-year quarter.

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Revenues declined 6% year over year to $6.5 billion. However, it beat the consensus mark by 0.4%. The downtick was caused by continued slowdown across the Agility and Reliability Solutions business segments.

Flex Ltd. Price, Consensus and EPS Surprise

Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote

In response to the better-than-anticipated results, shares were up 3.2% and closed the session at $35.78 on Oct. 30. In the past year, the stock has gained 39.1% compared with the sub-industry’s rise of 1.8%.

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Segment Details

The Flex Reliability Solutions Group encompasses Health Solutions, Automotive and Industrial businesses. Revenues plunged 11% year over year to $2.9 billion. The contraction was caused by weak macro trends in core industrial areas. However, healthy demand in data center power and healthcare devices offered some cushioning. 

The Flex Agility Solutions Group comprises Communications & Enterprise Compute or CEC and Lifestyle and Consumer Devices businesses. Revenues remained flat at $3.6 billion. Positive trends were observed in cloud amid softness in enterprise IT and non-cloud-related networks.

Operating Details

Non-GAAP gross margin expanded 90 basis points (bps) year over year to 8.5% in the reported quarter.

Non-GAAP operating income came in at $358 million, up from the prior-year level of $327 million. Non-GAAP operating margin expanded 80 bps to 5.5%.

Non-GAAP selling, general & administrative expenses totaled $196 million, down 2% year over year.

The adjusted operating margins of the Flex Reliability Solutions Group were 5.4%, up 20 bps from the prior-year level. The adjusted operating margins of the Flex Agility Solutions Group improved 150 bps to 6.1%.

Balance Sheet & Cash Flow

As of Sept. 27, 2024, cash & cash equivalents and long-term debt (net of current portion) were $2.6 billion and $3.18 billion, respectively, compared with $2.53 billion and $3.27 billion a year ago.

The company generated a second-quarter fiscal 2025 cash flow from operating activities of $319 million and an adjusted free cash flow of $219 million.

As of Sept. 27, 2024, FLEX repurchased shares worth $750 million.

Outlook

For the third quarter of fiscal 2025, Flex expects revenues to be between $6 billion and $6.4 billion. Management expects adjusted earnings of 60-66 cents per share, excluding 7 cents for net restructuring charges, 8 cents for stock-based compensation expense and 3 cents for net intangible amortization. Adjusted operating income is projected to be between $335 million and $365 million.

For the Reliability Solutions business, management forecasts sales to remain flat to down mid-single digits owing to macro weaknesses in the automotive vertical. Agility Solutions’ revenues are anticipated to be down low to high single digits, with steady growth expected in cloud and other end markets.

Due to macro headwinds, Flex now expects revenues to be between $24.9 billion and $25.5 billion for fiscal 2025. Earlier it projected revenues in the $25.4-$26.4 billion band.

It now anticipates adjusted earnings in the range of $2.39-$2.51 per share, excluding 30 cents for stock-based compensation expense, 19 cents for net restructuring charges and 13 cents for net intangible amortization. Earlier EPS projections ranged from $2.30 to $2.50 per share.

FLEX’s Zacks Rank

Flex currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

Iridium Communications IRDM reported EPS of 21 cents for the third quarter of 2024, beating the Zacks Consensus Estimate by 5%. The company incurred a loss of 1 cent per share in the prior-year quarter.

Shares of IRDM have lost 20.4% in the past year. 

Seagate Technology Holdings STX reported first-quarter fiscal 2025 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate by 6.8% and coming toward the high end of management’s guidance of $1.40 per share (+/- 20 cents). The company reported a non-GAAP loss of 22 cents per share in the year-ago quarter. 

Shares of STX have gained 46.1% in the past year. 

Western Digital Corporation WDC reported first-quarter fiscal 2025 non-GAAP earnings of $1.78 per share, surpassing the Zacks Consensus Estimate by 2.3%. The company incurred a loss of $1.76 per share in the prior-year quarter.

Shares of WDC have gained 66.9% in the past year.

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