Plexus Corp. (PLXS) has posted several quarters of strong results, with significantly higher than expected revenue and bookings. Although EPS has not been as strong, much of this is related to a higher tax rate. We believe that PLXS is among the best positioned in the industry and is poised to grow in the medical segment as well.
The company's outlook continues to be strong in spite of macro economic concerns, which have yet to affect its customers. We, therefore, maintain a Buy rating on the stock.
Plexus is currently trading at 13.9x our 2008 earnings estimate of $1.91 per share, a discount to its peer group. On a P/S basis, the stock is trading at 0.7x estimated 2008 revenue, still a discount to its peer group. We believe that over the long-term, PLXS is in the top tier of the EMS universe with the highest gross margin among its EMS peer group and above industry growth rates.
On April 23rd, Plexus announced results for the second quarter of fiscal 2008, ended March 29, 2008. Revenue for the quarter was $451.1 million, compared to $360.2 million in the year-ago quarter and our estimate of $450 million. EPS for the quarter was $0.48 compared to $0.23 in the year-ago period and our estimate of $0.51. EPS for the quarter included four cents in stock based compensation. Strong results in wireline, up 11.4% sequentially, and industrial/commercial, up 11.6%, offset slowing defense revenue, which was down 36.3% due to completion of a program.
During the quarter, Plexus repurchased 2.9 million shares under the accelerated repurchase program for a total of $100 million. PLXS expects to complete the accelerated repurchase program in the third fiscal quarter. Moreover, we believe that PLXS is better positioned in growth businesses, such as medical devices.
We, therefore, believe that the shares should trade at a premium to the peer group. We maintain our $34 price target, which we believe adequately reflects current macro-economic concerns, and represents a multiple of 17.8x estimated 2008 EPS.
Read the full analyst report on PLXS.
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