Fabrinet (FN) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

Fabrinet FN delivered non-GAAP earnings per share of $1.68 for fourth-quarter fiscal 2022, which were 9 cents above the upper end of management’s guided range. The bottom line increased 28% year over year and beat the Zacks Consensus Estimate by 8.39%.

Revenues of $587.9 million were up 15% on a year-over-year basis, surpassing the consensus mark by 1.17%. The top line was positively impacted by a solid surge in optical communications and datacom revenues.

Quarter in Detail

In the fiscal fourth quarter, Fabrinet’s optical communications revenues were $464.7 million, up 20% from the year-ago fiscal quarter’s reported figure. Fabrinet’s optical revenues were driven by Telecom revenues of $371.9 million, up 20% from the year-ago quarter’s reported number.

Datacom revenues also rose 20% year over year to $92.8 million on solid development in silicon photonics revenues, which were up $151.1 million, reflecting an increase of 37% from the year-ago quarter’s figure.

Revenues from product rated at speeds of 400 gig or more were $178.9 million, up 34% year over year. However, the top line was down 5% from the level recorded in the fiscal third quarter due to rising supply constraints on some products in the reported period.

Fabrinet Price, Consensus and EPS Surprise

Fabrinet Price, Consensus and EPS Surprise

Fabrinet price-consensus-eps-surprise-chart | Fabrinet Quote

In the non-optical communications business sector, automotive revenues were $53.3 million, up 9.7% year over year. Industrial laser revenues were $37.2 million, down 9.5% year over year.

Other non-optical communications revenues were $30 million, up 6.4% year over year.

Adjusted gross margin was 13%, which improved 70 bps year over year. However, the same was affected by a foreign exchange loss of about 20 basis points.

Operating expenses in the fiscal fourth quarter were $13.5 million, up 12.5% from the year-ago fiscal quarter’s reading.

Operating income for the quarter was $62.8 million, up by 24.4% from the year-ago fiscal quarter’s level.

Balance Sheet & Cash Flow

As of Jun 30, 2022, Fabrinet reported cash, restricted cash and investments of $478.5 million compared with $515.1 million as of Mar 31, 2022.

Cash flow from operations was $16.3 million in the fiscal fourth quarter compared with a cash flow of $50.4 million in the fiscal third quarter.

In the fiscal fourth quarter, CapEx was $14.3 million with a free cash flow of $2.1 million compared with the previous fiscal quarter’s CapEx of $23.5 million and a free cash flow of $26.9 million.

During the fiscal quarter in review, Fabrinet repurchased approximately 353,000 shares at an average price of $88.67 per share for a total cash outlay of $31.3 million.

For fiscal 2022, Fabrinet repurchased approximately 630,000 shares for a total cash outlay of nearly $60 million.

Guidance

For the first quarter of fiscal 2023, Fabrinet expects revenues in the range of $620-$640 million.

FN expects Non-GAAP net earnings per share in the range of $1.72-$1.79, based on 37.6 million outstanding shares.

Zacks Rank & Stocks to Consider

Fabrinet currently has a Zacks Rank #3 (Hold).

Fabrinet’s shares have fallen 4% compared with the Zacks Computer and Technology sector’s decline of 19.7% in the year-to-date period.

Here are some better-ranked stocks from the broader sector.

Intuit INTU carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuit’s shares have slumped 24.9% in the year-to-date period compared with the Zacks Computer - Software industry’s decline of 15.3%. INTU is scheduled to report second-quarter 2022 results on Aug 23.

Keysight Technologies KEYS carries a Zacks Rank of 2, currently.

KEY’s shares have dropped 18% in the year-to-date period compared with the Zacks Electronics - Measuring Instruments industry’s decline of 15.3%. KEYS is scheduled to report second-quarter 2022 results on Aug 17.

Arco Platform ARCE is presently Zacks #2 Ranked.

ARCE’s shares have plunged 19.6% in the year-to-date period compared with the Zacks Internet - Software industry’s decline of 42.7%. ARCE is scheduled to report second-quarter 2022 results on Aug 18.

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