On Thursday, Needham increased its price target on Plexus Corp (NASDAQ:PLXS) to $144 from $114, while reaffirming its Buy rating on the stock. The adjustment follows Plexus's fiscal third-quarter performance, which, despite reporting revenues at the lower end of its guidance, saw improved margins leading to a significant earnings per share (EPS) beat.
Plexus's revenue for the recent quarter fell short of market expectations, primarily due to slower customer ramp-ups in the Aerospace & Defense and Industrial sectors. Nevertheless, the company observed a positive demand trend across various end markets as the quarter progressed. Year-over-year, fiscal second-quarter revenue decreased by 6%, aligning with the forecasted range of a 2-6% decline. The adjusted EPS exceeded both the company's high-end guidance and analyst expectations, thanks to the better margins achieved.
Looking ahead, Plexus has set its fiscal fourth-quarter 2024 revenue growth target at 3% quarter-over-quarter, which aligns with median analyst projections. More notably, the company's next-quarter non-GAAP EPS forecast is significantly above both consensus and previous estimates, indicating a robust earnings outlook.
Needham's continued endorsement of a Buy rating reflects growing confidence in Plexus's ability to achieve its fiscal year 2025 targets as outlined by management. The firm highlighted Plexus's solid performance and favorable guidance as key factors supporting the positive outlook for the stock.
"In other recent news, Plexus Corp. has reported significant developments in its financial performance. The company announced a prosperous fiscal second quarter for 2024, marked by $255 million in new program wins, contributing to an anticipated 9% to 12% revenue compound annual growth rate (CAGR) in the upcoming years. In addition, Plexus Corp. expects to reach a 5.5% GAAP operating margin by fiscal 2025 and generated $65 million in free cash flow in the second quarter. For the third quarter, the company anticipates revenues of $960 million to $1 billion and a non-GAAP operating margin between 5.2% and 5.6%.
Following a site visit, Benchmark has raised the price target for Plexus Corp shares to $120 from the previous $110, maintaining a 'Buy' rating. This adjustment is based on the firm's confidence in Plexus' financial trajectory, underpinned by the complexity of their products, technological innovation, and a corporate culture focused on quality, customer success, and sustainability.
Other recent developments include Plexus Corp.'s commitment to sustainability, with an annual sustainability report set to be released soon. Despite some decreases in qualified manufacturing opportunities and muted outlooks in certain sectors, the company has seen strong performance in the Healthcare/Life Sciences sector and robust demand in the Americas. These highlights reflect the recent progress of Plexus Corp."
InvestingPro Insights
In light of Needham's updated price target and optimistic outlook on Plexus Corp (NASDAQ:PLXS), it's worth noting some additional insights from InvestingPro. Plexus's stock has been recognized for its low price volatility, suggesting a stable investment for those averse to large market swings. Additionally, analysts have revised their earnings upwards for the upcoming period, implying potential for continued financial performance that may exceed market expectations.
InvestingPro data highlights a moderate P/E ratio of 32.12, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at 24.24, reflecting the company’s earnings relative to its share price. The company's gross profit margin stands at 9.18%, which points to some challenges in profitability despite its strong return over the last month of 12.67% and an impressive 17.22% over the last three months.
For those seeking further insights and tips, InvestingPro offers additional analysis on Plexus, including the company's debt levels, trading proximity to its 52-week high, and its performance over the last five years. It's noteworthy that Plexus does not pay a dividend, which may be a consideration for income-focused investors.
For a deeper dive into Plexus's financial health and to access more InvestingPro Tips, visit https://www.investing.com/pro/PLXS. Additionally, readers can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 10 additional InvestingPro Tips available, offering a comprehensive view of Plexus's investment potential.
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