What happened
Shares of TTM Technologies (TTMI +1.14%) tumbled as much as 17.4% lower on Thursday, following the company's fourth-quarter earnings report. The stock had recovered somewhat by 2:40 p.m. ET, showing a smaller single-day drop of 13.9%.
So what
TTM's fourth-quarter sales rose 3.2% year over year to $617 million. Adjusted earnings jumped from $0.34 to $0.41 per diluted share over the same period.
That's a mixed bag, compared to Wall Street's expectations. The average analyst was looking for earnings near $0.38 per share on top-line revenue in the neighborhood of $659 million. The midpoint of TTM's guidance for this period pointed to earnings of $0.39 per share and sales of approximately $650 million.
Furthermore, guidance for the next quarter came in significantly below the current Street views across the board. As a result, the maker of electronic components and printed circuit boards is closing three of its manufacturing facilities before the end of 2023. The idea is to align the company's manufacturing capacity with lower demand and slower order flows, resulting in modest cost savings over the next few years.
NASDAQ: TTMI
Key Data Points
Now what
The plant closings are not exactly layoffs but more of a restructuring move. Around 650 employees in the Hong Kong, Santa Clara, and Anaheim campuses are affected, which works out to roughly 5% of TTM's global workforce. In most cases, the employees, pre-approved orders, and manufacturing tools will relocate to other TTM plants nearby.
I think that's a smart approach. Consolidating TTM's global network of manufacturing facilities should improve the company's efficiency without undermining the ability to ramp up production flows when the economy awakens again. Overreacting to the upswings and downturns of a cyclical market only amplifies and exaggerates the next round of gains and drops. TTM is doing its best to avoid that type of mistake.
That being said, the reported revenue miss and modest first-quarter guidance are uncomfortable on many levels. Key markets, such as the networking equipment and data center industries, are working through existing inventories instead of ordering more components. In other words, TTM's disappointing sales suggest another quarter or two of slow infrastructure upgrades in these sectors.
