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A month has gone by since the last earnings report for Flex (FLEX). Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Flex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Flex Q1 Earnings Beat Estimates, Revenues Fall Y/Y
Flex reported first-quarter fiscal 2021 adjusted earnings of 23 cents per share that beat the Zacks Consensus Estimate by 27.8%. However, the figure decreased 14.8% year over year.
Revenues declined 16.6% year over year to $5.15 billion but beat the consensus mark by 2.9%. The year-over-year decline was primarily due to automotive shutdowns and slow ramp of projects.
Most of Flex’s North American and European auto-production sites remained closed in the reported quarter.
Segment Details
Beginning fiscal first quarter, the company started reporting in two segments - Flex Agility Solutions Group and Flex Reliability Solutions Group.
Flex Agility Solutions Group comprises Health Solutions, Automotive and Industrial businesses. Revenues declined 1% year over year to $2.24 billion.
Markedly, the company has produced more than 20 million masks to date at seven locations across the globe. Moreover, all of Flex’s production sites around the globe are up and running and the company witnessed significant improvement in supply chain, which was massively disrupted by the coronavirus outbreak.
Flex’s Health Solutions business benefited from strong demand for ventilators, testing equipment, oxygen concentrators, fusion pumps, patient monitors and ICU beds. The company also saw continued strength in industrial end-market such as power products.
Flex Reliability Solutions Group comprises Communications & Enterprise Compute or CEC, Lifestyle and Consumer Devices businesses. Revenues plunged 25% year over year to $2.91 billion.
CEC benefited from strong demand for networking and compute equipment to support the increased workload from work-and-learn from home. However, sluggish Lifestyle and Consumer Devices businesses negatively impacted the segment’s growth in the quarter under review.
Operating Details
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis and came in at 6.2% in the reported quarter.
Non-GAAP selling, general & administrative (SG&A) expenses as a percentage of revenues declined 20 bps year over year to 3%.
Non-GAAP operating margin contracted 20 bps on a year-over-year basis to 3.2%.
Flex Agility Solutions Group operating margin was 5.1%. Flex Reliability Solutions Group operating margin was 2.5%