Why Plexus' Analyst Day Was 'Largely Bullish'

RBC Capital Markets analysts Mitch Steves, Jae Cho, Amit Daryanani and Jeriel Ong have termed analysts day as largely a bullish one as far as Plexus Corp. PLXS is concerned. The company took this stance mainly because of three reasons:

• 1. The focus on 12 percent long-term revenue growth,
• 2. The reiteration of 4.75–5.0 percent operating margins, and
• 3. An economic target return of 5 percent.

The analysts have kept Sector Perform rating with a price target of $46.00.

These analysts attended Plexus' Analyst Day and left increasingly positive on few points. The first one was the reiteration of guidance, the second was in respect of $150 million share buyback program and the third was the potential for double-digit growth.

Related Link: Plexus Reports $150M Buyback Plan

The analysts said, "While we think 12 percent growth is likely aspirational, closer to mid-high single digits should be achievable assuming the macroeconomic climate remains healthy. Going forward we look for clean revenue growth and execution given recent history of moving customers (disengagements)."

The RBC analysts were positive on the financial model and targets, as it is continuing to target revenue growth of 12 percent and an economic return of 5 percent, all while guiding a $3 billion run-rate through FY17.

The brokerage thinks the company will continue to make buyback of the shares as evidenced by its recently announced $150 million repurchase program, which could result in approximately $0.35–$0.40 in annual EPS accretion. The company has reduced its total share count by 28 percent over the last nine years, and the additional repurchase program could result in an additional reduction of roughly 10 percent.

At time of writing with less than 30 minutes remaining in Thursday's afternoon session, Plexus was trading up 0.82 percent at $44.90.