FLEX's Q1 Earnings Surpass Estimates, Revenues Decline Y/Y

Flex Ltd FLEX reported first-quarter fiscal 2025 adjusted earnings per share of 51 cents, beating the Zacks Consensus Estimate by 24.4%. The bottom line compared favorably with the prior-year quarter's 47 cents per share.

Revenues fell 8% year over year to $6.3 billion. However, it surpassed the consensus mark by 7%. The downside resulted from a slowdown in the Agility and Reliability Solutions business segments.

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Segment Details

The Flex Reliability Solutions Group encompasses Health Solutions, Automotive and Industrial businesses. Revenues were down 10% year over year to $2.9 billion. The downtick is caused by weak macro trends in core industrial areas, offset by momentum in automotive, cloud, data center power and healthcare devices.

The Flex Agility Solutions Group comprises Communications & Enterprise Compute or CEC and Lifestyle and Consumer Devices businesses. Revenues were down 5.5% to $3.4 billion from the prior-year figure of $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 increased 50 basis points (bps) on a year-over-year basis to 7.8% in the reported quarter.

Non-GAAP operating income came in at $306 million, up from the prior-year level of $293 million. Non-GAAP operating margin expanded 50 bps to 4.8%.

Non-GAAP selling, general & administrative expenses totaled $189 million, down 9% year over year.

The adjusted operating margins of the Flex Reliability Solutions Group was 5%, on par with the prior year's level. Adjusted operating margins of the Flex Agility Solutions Group improved 120 bps to 5.3%.

Balance Sheet & Cash Flow

As of Jun 30, 2024, cash & cash equivalents and long-term debt (net of current portion) were $2.24 billion and $2.6 billion, respectively, compared with $2.3 billion and $3.3 billion a year ago.

In first-quarter fiscal 2025, the company generated cash flow from operating activities of $340 million and an adjusted free cash flow of $232 million.

Guidance

For second-quarter fiscal 2025, Flex expects revenues to be between $6.2 billion and $6.8 billion.

Management expects adjusted earnings in the range of 52-60 cents per share, excluding 1 cent 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 $310 million and $350 million.

For fiscal 2025, Flex expects revenues to be between $25.4 billion and $26.4 billion. It anticipates adjusted earnings in the range of $2.30-$2.50 per share, excluding 32 cents for stock-based compensation expense, 25 cents for net restructuring charges and 13 cents for net intangible amortization.

Management further anticipates momentum in key end-markets - cloud, power, auto and medical devices. However, rising global tax rates and a dynamic macro backdrop remain headwinds.

Zacks Rank

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

Performance of Other Companies

BlackBerry's BB reported first-quarter fiscal 2025 adjusted loss per share of 3 cents is narrower than the company's estimate of a loss of 4-6 cents. In the year-ago quarter, it reported non-GAAP earnings of 6 cents per share. The Zacks Consensus Estimate was pegged at a loss of 4 cents per share.

Shares of BB have lost 48.9% in the past year. 

Badger Meter, Inc BMI reported earnings per share of $1.12 for second-quarter 2024, beating the Zacks Consensus Estimate by 14.3%. Also, the bottom line compared favorably with the year-ago quarter's EPS of 76 cents.

Shares of BMI have gained 22% in the past year. 

SAP SE SAP reported second-quarter 2024 non-IFRS earnings of €1.10 ($1.18) per share, climbing 59% from the year-ago quarter's levels. The Zacks Consensus Estimate was pegged at $1.01.

In the past year, shares of SAP have gained 57.9%.

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