Fabrinet (FN -19.38%) stock got hit with a big pullback in Tuesday's trading. The optical technologies specialist's share price fell 19.4% in a session that saw the S&P 500 decline 0.7% and the Nasdaq Composite decline 1.4%.
After the market closed yesterday, Fabrinet published results for the fourth quarter of its 2026 fiscal year -- which wrapped on June 26. The company posted fiscal Q4 results that exceeded Wall Street's targets, but investors weren't happy with management's forward guidance.
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Fabrinet had strong momentum last quarter, but it wasn't enough for investors
Fabrinet's fiscal Q4 report arrived with a substantial earnings beat and sales that also topped expectations. The company recorded non-GAAP (adjusted) earnings of $4.10 per share on sales of $1.32 billion in the quarter. Sales were up roughly 45% year over year and beat the average analyst target by $40 million, and adjusted earnings per share were up roughly 55% year over year to $4.10 and topped the average analyst estimate by approximately $0.29 per share. The company set new records for revenue and adjusted earnings in the quarter, but it wasn't enough to power gains for the stock.
NYSE: FN
Key Data Points
Guidance looked encouraging, but there was a catch
In the current quarter, Fabrinet expects to record adjusted earnings per share between $4.10 and $4.25 on revenue between $1.375 billion and $1.425. The company's sales and earnings guidance came in well above the average analyst estimates, which had targeted adjusted earnings per share of roughly $3.99 on sales of roughly $1.32 billion.
While Fabrinet's adjusted gross margin declined to 12.2% in fiscal Q4 from 12.5% in the prior-year period, the company's recent quarterly report and forward guidance generally looked pretty solid. Unfortunately, the company's free cash flow (FCF) declined to -$36.9 million due to high capital expenditures last quarter and brought total FCF for the year down to roughly $4 million. So while the business is generating solid earnings, the company is funneling that money back into building out its infrastructure -- and investors sold out of the stock today due to concerns about how well the plan will play out over the long haul.
