Flextronics Profit Drops, But Tops Estimates

(RTTNews) - Contract electronics manufacturer Flextronics International Ltd. (FLEX), Tuesday reported a lower second-quarter profit as costs continued to escalate, offsetting growth in sales. Nevertheless, both earnings and revenue for the quarter topped Wall Street estimates.

Moving forward, the company detailed its outlook for the third quarter, the midpoint of which is indicated to miss current analysts' expectations.

"We are making progress in our transformation and this quarter's results reflect execution of our strategy," said CEO Mike McNamara. "As we further strengthen our supply chain solutions offering and strategically invest in our business, we are improving our cost structure while continuing to expand our revenue..."

Flextronics expertise include computing, electronic games, mobile communication and digital devices. The company has in the past grappled with weak economic conditions and had cut jobs.

In the second quarter, Singapore-based Flextronics reported sales of $6.41 billion compared with $6.18 billion last year. On average, 12 analysts polled by Thomson estimated sales of $6.28 billion for the quarter.

Cost of sales in the second quarter increased to $6.04 billion compared with $5.8 billion a year ago. Selling and other expenses increased to $219 million from $192 million last year.

As a result, the company's net income for the second quarter dropped to $118 million or $0.19 per share from $151 million or $0.22 per share last year.

Excluding items, adjusted earnings were $134 million or $0.22 per share, compared with $176 million or $0.26 per share a year ago. Thirteen analysts had a consensus earnings estimate of $0.21 per share for the quarter. Analysts' estimates typically exclude special items.

For the third quarter, Flextronics expect adjusted earnings in the range of $0.21 to $0.25 per share and sales of $6.5 billion to $6.9 billion. Net earnings are expected to be lower than the guidance provided by about $0.03 per share for intangible amortization and stock-based compensation expense. Analysts currently estimate earnings of $0.25 per share on revenue of $6.79 billion for the third quarter.

In April, Flextronics completed acquisition of manufacturing operations in Tianjin, China and assumed the management of the Jaguariuna, Brazil facility from Motorola Mobility LLC, owned by Google Inc. (GOOG).

Meanwhile, rival Jabil Circuit Inc. (JBL) last month reported a better-than-expected fourth-quarter profit, helped by an income tax benefit. Jabil also had detailed some weak outlook for the first quarter, denoting the struggles faced by its customers such as smartphone maker BlackBerry.

Flextronics stock closed Tuesday at $8.85, down $0.13 or 1.44%, on a volume of about 9 million shares on the Nasdaq. In after hours, the stock dropped $0.16 or 1.82%, trading at $8.69. In the last 52-week period, the stock trended in a range of $5.47 - $9.71, on a three-month average volume of 4.7 million shares.