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Why Flextronics International Ltd. Stock Flew Higher Today

By Steve Symington - Jan 29, 2016 at 6:10PM

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The supply-chain company handily exceeded guidance in its latest quarter. Here's how.

What: Shares of Flextronics International Ltd. ( FLEX -4.03% ) rose 10% Friday after the supply-chain solutions company announced better-than-expected fiscal third-quarter 2016 results.

So what: Quarterly revenue fell 3.7% year over year, to $6.8 billion, and translated to a 12% increase in adjusted net income, to $196 million, or $0.35 per share.

Both figures were well above analysts' expectations, which called for revenue of $6.5 billion, and adjusted earnings of $0.31 per share. In all fairness, these results also came in above Flextronics' own guidance for revenue in the range of $6.2 billion to $6.8 billion, and adjusted earnings per share of $0.28 to $0.34.

"We continued to position our company as a leader in the [Internet of Things] space," explained Flex CEO Mike McNamara, "and our third quarter demonstrated sequential growth across all four of our business groups, resulting from new programs and an improving engagement model. Operating margins improved both sequentially and year-over-year, a testament to the stronger value proposition we are delivering to our customers."

Now what: For the current quarter, Flextronics expects revenue of $5.5 billion to $6.1 billion, and adjusted earnings per diluted share of $0.25 to $0.31. By comparison, analysts' consensus estimates predicted fiscal fourth-quarter 2016 revenue of roughly $6 billion, or above the midpoint of that guidance, with earnings slightly below the middle of Flextronics' range at $0.27 per share.

But it's also hard not to wonder whether Flextronics could be under promising with the intention of once again over delivering on revenue. Either way, given the company's solid top- and bottom-line beat in fiscal Q3, I think investors have every right to be happy with Flextronics' performance today.

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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