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FLEX Stock Up 19% in the Past Year: Will the Rally Continue?

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Flex Ltd (FLEX - Free Report) has witnessed strong momentum in the past year, with its shares rising 19% compared with the sub-industry’s growth of 15.8%.

Flex has a diverse workforce across 30 countries and offers advanced manufacturing solutions and additional value to customers through a wide array of services, including design and engineering, component services, rapid prototyping, fulfilment and circular economy solutions. The company has expanded and enhanced its service offering with capabilities in software, robotics, artificial intelligence, factory automation, simulation, digital twins and other disruptive technologies.

The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 15%. The stock is still down 7.5% from its 52-week high level of $34.12.

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Key Growth Drivers

FLEX’s performance is buoyed by healthy demand trends across cloud /AI, automotive and digital healthcare.

The rapid AI proliferation in the data center vertical is driving increasing demand for cloud solutions. The company’s innovative suite of power products and services enhances its customer satisfaction. All these factors are favorably positioning Flex for the AI-powered technology shift, prevalent in the industry, from grid to chip and the cloud to the edge. New deal wins and accelerating content growth amid soft EV trends are powering the automotive unit. Also, the company’s digital healthcare segment is witnessing strong medical device demand, whereas the soft medical equipment market remains weak.

Synergies from the acquisition of FreeFlow augurs well. FreeFlow offers services in global secondary markets, specializing in asset disposition, digital circular economy tracking and reporting capabilities. The initiative is likely to augment FLEX’s service footprint across emerging markets, such as data center, enterprise and lifestyle, unlocking new sources of revenues and fostering sustainability through second-life products.

However, affected by weak macro trends in core industrial, management expects revenues in Reliability Solutions to be down from high single-digit to mid-teens in the fiscal second quarter. A slowdown in enterprise IT spending will keep Agility Solutions revenues flat to slightly down. Rising global tax rates and a dynamic macro backdrop remain woes for this Zacks Rank #3 (Hold) stock.

For second-quarter fiscal 2025, Flex expects revenues to be between $6.2 billion and $6.8 billion, while adjusted earnings in the range of 52-60 cents per share.
 

A Look at Estimate Revision Activity

FLEX’s earnings per share are expected to increase 12.6% and 15.9% on a year-over-year basis to $2.42 and $2.80, respectively, in fiscal 2025 and 2026.  
The Zacks Consensus Estimate for fiscal 2025 and 2026 earnings has improved 2.5% and 2.2%, respectively, in the past 60 days.

For fiscal 2025, revenues are anticipated to decline 7.3% to $26 billion, while revenues for fiscal 2026 are expected to increase 4% to $27.2 billion.
 

Stocks to Consider

Some better-ranked stocks worth consideration in the broader technology space are Badger Meter (BMI - Free Report) , Manhattan Associates (MANH - Free Report) and ANSYS (ANSS - Free Report) . Manhattan Associates sports a Zacks Rank #1 (Strong Buy), while Badger Meter and ANSYS carry a Zacks Rank #2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 4.4% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 24.9% in the past year.

The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.72, up 3.7% in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the mark once, with the average surprise being 4.8%. Its shares have risen 7.4% in the past year.

The Zacks Consensus Estimate for MANH’s 2024 EPS is pegged at $4.26. MANH’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 26.6%. The stock has surged 33.6% in the past year.

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