UPDATE: Goldman Sachs Resumes Coverage on Plexus on Margin and ROIC Upside

In a report published Wednesday, Goldman Sachs analyst Mark Delaney resumed coverage on Plexus Corp. PLXS with a Buy rating and $42.00 price target. In the report, Goldman Sachs noted, “We resume coverage of Plexus with a Buy rating and a 6-month price target of $42 (12% upside). Plexus has lagged EMS peers (it is up 24% yoy vs. the peer average of up 61% yoy), likely driven by its announcement in November 2012 that its historically largest customer Juniper (16% of revenue) was leaving to consolidate with fewer suppliers. In addition, sales to Coke (formerly a large customer) have been well below prior levels due to weak sell-through of the Coke freestyle machine. We believe this creates an opportunity. (1) Plexus's revenue growth profile is de-risked, and it now has about 70% of sales tied to high-mix end markets. (2) We expect Plexus to expand margins and ROIC in 2014 due to the increased percentage of high-mix business and reduced capex on facility consolidations. (3) We believe Plexus is a potential M&A candidate given its exposure to high-mix markets where its larger competitors have been doing M&A.” Plexus Corp. closed on Tuesday at $37.66.