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Plexus Profit Down, Misses Estimate, Sees Strong Q2 Revenues

Plexus Corp. (PLXS) Wednesday reported a decline in profit for the first quarter despite higher revenues, hurt mainly by weak margins and higher selling and administrative costs. Both earnings and revenues missed analysts' expectations.

Moving ahead, the contract electronics maker expects second-quarter revenues to exceed current Street estimates, sending its shares up 4 percent in after-hours trade.

Plexus has struggled in the recent quarters as weak economic conditions restrain its customers from expanding their manufacturing operations. In November, Plexus announced the loss of its largest customer, Juniper Networks Inc. (JNPR), after the computer networking gear-maker informed Plexus it will no longer use its manufacturing services.

Wisconsin-based Plexus' first-quarter profit dropped to $16.6 million or $0.47 per share from $17.9 million or $0.51 per share last year. On average, ten analysts polled by Thomson Reuters expected earnings of $0.50 per share for the quarter. Analysts' estimates typically exclude special items.

Chief Executive Dean Foate said, "Relative to our original expectations, manufacturing demand softened across all of our sectors during the quarter, particularly for our Networking/Communications sector in the final few weeks. Despite the challenges in the end-market demand environment, our new business development results were strong again in the first quarter."

Plexus said it has won 23 new deals, which are expected to generate about $193 million in annual revenues when fully ramped into production.

Net sales for the quarter rose to $531 million from $529.7 million last year. Nine analysts had consensus revenue estimate of $551.98 million for the quarter.

Gross margin for the period dropped to 9.6 percent from 9.8 percent, while operating margin declined to 4.1 percent from 4.5 percent last year.

Looking forward to the second quarter, Plexus expects earnings of $0.50 to $0.55 per share, and revenues of $550 million to $580 million. Analysts currently expect earnings of $0.53 per share on revenues of $561.41 million for the quarter. Plexus said its earnings estimate for the second quarter exclude restructuring charges and including about $0.08 per share of stock-based compensation expense.

"Recognizing the challenges the business will face after June 30 from the disengagement of our largest customer, we remain keenly focused on managing our cost structure to achieve acceptable financial results as we work to ramp up new business to replace the Juniper revenues," Foate said.

Taking into account of Juniper's exit and current new business, Plexus now expects to post a flat revenues for the full year 2013 compared to 2012 and to "strive for modest revenue growth" in 2014.

PLXS closed Wednesday's trading at $25.08, up 0.48 or 1.95%. The stock further gained $1.02 or 4.07% in after-hours trade.

by RTTNews Staff Writer

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