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Why Shares of Flex Ltd. Are Plummeting Today

By Timothy Green - Oct 26, 2018 at 12:37PM

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A decent quarter was marred by weak guidance and other bad news.

What happened

Shares of Flex Ltd. ( FLEX 1.86% ) plunged on Friday after the electronics manufacturing services provider reported mixed second-quarter results. The company missed analysts' estimate for revenue, announced an end to a partnership with Nike, disclosed that its CEO was retiring at the end of the year, and provided guidance that was below expectations. As of 11:30 a.m. EDT, the stock was down about 32%.

So what

Flex reported second-quarter revenue of $6.7 billion, up 7% year over year but $80 million below the average analyst estimate. Non-GAAP earnings per share came in at $0.29, up from $0.27 in the prior-year period and $0.01 higher than analysts were expecting.

A slumping chart.

Image source: Getty Images.

Along with its results, Flex announced that CEO Mike McNamara will retire at the end of the year. The company also disclosed that its efforts with Nike to make footwear manufacturing operations in Mexico feasible had failed, and that the operation would be shut down at the end of the year.

Now what

Flex expects to produce third-quarter revenue between $6.6 billion and $7.0 billion, and non-GAAP EPS between $0.29 and $0.33. Both ranges are below analyst expectations of $7.24 billion and $0.36, respectively.

For the full year, Flex sees revenue between $26 billion and $27 billion, and non-GAAP EPS between $1.05 and $1.15. Analysts were expecting full-year earnings of $1.23 per share. The company blamed component shortages, capacity constraints, and pressure in the automotive and industrial businesses for the weak guidance.

With a flurry of bad news to go along with a mixed quarter, it's no surprise that investors are pushing down the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Flex Ltd. Stock Quote
Flex Ltd.
FLEX
$16.97 (1.86%) $0.31

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