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Fabrinet's (FN) Q2 Earnings & Revenues Beat Estimates, Up Y/Y


Fabrinet FN delivered second-quarter fiscal 2021 adjusted earnings of $1.10 per share. The reported figure beat the Zacks Consensus Estimate by 5.8% as well as increased 10% year over year.

Revenues of $453.8 million outpaced the consensus mark by 4.6% and climbed 6.5% year on year.

This top-line growth was primarily driven by momentum in automotive programs, along with contribution from new automotive programs such as LIDAR.

End Market Details

Optical Communications revenues (76.6% of total revenues) rose 8% from the year-ago quarter to $347.8 million. This upswing resulted from strong growth in telecom revenues which more than offset weakness in datacom revenues.
 

Fabrinet Price, Consensus and EPS Surprise

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

Within Optical Communications, telecom revenues amounted to $273.2 million, up 5% sequentially. Growth in telecom revenues was partly driven by Fabrinet’s optical transport systems program at Cisco CSCO. However, datacom revenues slid 10%, quarter on quarter, to $74.6 million.

Non-optical communications revenues (23.4% of total revenues) inched up 1.8% from the year-ago-quarter to $106 million on robust performance of new automotive programs.

Automotive revenues surged 34% sequentially and more than 100% on a year-over-year basis, to $47 million.

Notably, revenues from industrial lasers amounted to $33.7 million, down 1% sequentially, while sensor revenues were flat at $2.8 million. Other non-optical communications revenues came in at $22.5 million in the fiscal second quarter, up 5% quarter on quarter.

 

Operating Details

Non-GAAP gross profit increased 7.7% year over year to $54.7 million. Additionally, gross margin expanded 13 basis points (bps) year over year to 12.1%.

Selling, general and administrative expenses (3.8% to revenues) flared up 0.5% from the year-ago quarter to $17.2 million.

Fabrinet reported non-GAAP operating profit of $41.9 million, up 8.8% year over year. Moreover, operating margin expanded 20 bps on a year-over-year basis to 9.2%.

Balance Sheet & Cash Flow

As of Dec 25, 2020, Fabrinet had cash & cash, restricted cash and investments worth $488.4 million compared with $503.8 million as of Sep 25, 2020.

In addition, as of Dec 25, 2020, the company had a long-term debt of $45.6 million compared with $48.6 million as of Sep 25, 2020.

Return on Invested Capital (ROIC), which is calculated as non-GAAP net income divided by average invested capital, was 29.1% for the fiscal second quarter compared with the year-ago quarter’s 28.7%.

Guidance

For third-quarter fiscal 2021, revenues are projected between $455 million and $475 million. Additionally, Fabrinet expects non-GAAP earnings between $1.10  and $1.17 per share.

Management also anticipates traction in the automotive space to continue, thereby driving top-line growth. Also, revenues from industrial laser and datacom products are anticipated to improve in the fiscal third quarter.

Further, telecom products will likely witness steady growth on solid demand for higher data rate products, along with the earlier-than-anticipated ramp-up of the company’s Cisco transfer program.

Zacks Rank & Other Stocks to Consider

Currently, Fabrinet carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector include TechTarget TTGT and Shopify SHOP. Both stocks sport a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

TechTarget is scheduled to release quarterly earnings on Feb 10, while Shopify will report on Feb 17.

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