Source: Davit Kirakosyan
Sanmina Corporation Surpasses Wall Street Expectations but Shares Fall on Disappointing Q4 Outlook
Sanmina Corporation (NASDAQ:SANM), a leading integrated manufacturing solutions company, exceeded Wall Street expectations in its fiscal third quarter, demonstrating strong financial performance. However, shares took a 4% hit in after-hours trading following a softer-than-anticipated outlook for the upcoming fourth quarter.
The company’s mixed report has stirred the market, causing investors to reconsider their positions. Despite robust Q3 numbers, the underwhelming forecast for Q4 has significantly impacted investor sentiment.
Sanmina’s Q3 Performance: Beating Estimates
For the quarter that concluded on June 28, Sanmina posted an adjusted earnings per share (EPS) of $1.53, comfortably exceeding the $1.42 prediction by financial analysts. This represents a significant growth in the company’s profitability, thanks to its strategic initiatives aimed at improving operational efficiency and cost management.
Moreover, the company’s revenue generation was also commendable. It achieved $2.04 billion in revenue, outpacing the consensus estimate of $1.98 billion. This figure represents a notable 10.9% surge from the $1.84 billion reported in the same period last year. This revenue growth can be attributed to the company’s successful execution of its growth strategies, including product diversification and expansion into new markets.
Q4 Outlook Falls Short, Impacting Investor Sentiment
Despite the impressive Q3 results, Sanmina’s stock experienced a downturn due to its disappointing Q4 guidance. The company projected its fourth-quarter revenue to fall between $2.0 billion and $2.1 billion, trailing the analysts’ expectations of $2.13 billion.
Similarly, the company’s earnings guidance for the next quarter, ranging from $1.52 to $1.62 per share, also missed the consensus midpoint. This lowered forecast is likely due to the company’s cautious approach in the face of potential supply chain disruptions and global economic uncertainties, partially driven by the ongoing impact of the COVID-19 pandemic.
The softer outlook for the future has cast a shadow over the company’s strong quarterly performance, triggering a negative reaction from investors and leading to a decrease in the company’s share price.
Improvements in Operating Margin and Cash Flow
During the reported quarter, Sanmina recorded a non-GAAP operating margin of 5.7%, showing a marked improvement from the 5.3% reported in the same quarter last year. This indicates that the company is making strides in enhancing its operational efficiency and profitability.
In terms of cash flow, the company reported strong numbers. Operating cash flow stood at a robust $201 million, with free cash flow amounting to $168 million. These figures reflect the company’s solid financial health and its ability to generate ample cash to finance its operations, invest in future growth, and return capital to shareholders.
Despite the softer Q4 outlook, Sanmina’s strong Q3 performance and cash flow generation demonstrate its resilience amid a challenging business environment. It remains to be seen how the company navigates the future and manages to deliver on its strategic objectives in the face of potential headwinds.
Investors and market watchers will be keenly monitoring Sanmina’s performance in the coming months, as it is representative of broader trends in the integrated manufacturing solutions sector.