Contract electronics manufacturer Flextronics International Ltd. (FLEX), Thursday reported a plunge in third-quarter profit, hurt by a decline in revenues amid a tepid economic scenario, as well as restructuring charges. However, quarterly earnings topped Street estimates by a penny.
Moving ahead, the company detailed a weak earnings forecast for the fourth quarter that dragged its shares down by 6.7 percent in after-hours trade on the Nasdaq.
Mike McNamara, the company's CEO, said, "It is clear that the macroeconomic environment is challenging with limited visibility and many economic risks remain."
McNamara hopes to improve results by optimizing operating footprint and controlling costs.
Flextronics provides design and electronics manufacturing services to original equipment makers such as Dell, Hewlett-Packard, Microsoft, Cisco, among others. Pallid business conditions have led to lower order intake that has dented revenues and margins too have come under immense pressure.
The company's net sales for the quarter plunged to $6.12 billion from $7.47 billion last year.
Analysts on consensus estimated revenues of $6.00 billion for the quarter.
Gross margin for the quarter shrunk to 4 percent from 5.2 percent last year, and operating margin receded to 0.6 percent from 1.9 percent.
The Singapore-based company reported third-quarter net income of $32 million or $0.04 per share, compared with $106 million or $0.14 per share last year.
Results for the quarter included charges of $103 million related to employee severance and asset impairment.
Excluding items, adjusted earnings from continuing operations for the quarter were $148 million or $0.22 per share, compared with $131 million or $0.18 per share a year ago.
Analysts on consensus expected earnings of $0.21 per share for the quarter. Analysts' estimates typically exclude special items.
For the fourth quarter, Flextronics expects adjusted earnings of $0.11 to $0.15 per share and revenues of $5 billion to $5.3 billion. Analysts currently expect earnings of $0.20 per share on revenues of $5.69 billion for the quarter.
The company expects to recognize an additional $100 million to $125 million in pre-tax restructuring charges in the fourth quarter, mainly on account of employee severance and benefits costs.
GAAP earnings per share are expected to be lower by about $0.02 per share for quarterly intangible amortization and stock-based compensation expense, and by about $0.15 to $0.18 per share for the remaining restructuring charges, it added.
FLEX closed Thursday at $6.72, up 1.20%, on a volume of 6.2 million shares on the Nasdaq. In after hours, the stock dropped $0.45 or 6.70%. In the past year, the stock traded in a range of $5.47 - $7.49.
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