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Technology Stocks : Flextronics International (FLEX)
FLEX 62.52-2.3%Oct 31 9:30 AM EDT
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To: Fuzzy who wrote (1417)4/28/2007 5:15:09 PM
From: rich evans   of 1422
 
I had a chance to look over flex report. Flex revenue growth was fine. But margins were not good.

Gross margins were 4.8%. Flex should be doing at least 6%.

SGA expense was 3.1% which is fine but that leaves a operating margin of only 1.7%. JBL and others (BHE) can do 4%.

So flexs true operating earnings were only 75 mill . This is the number to focus on as it is theabove the line number showing true business results . It includes stock /option compensation expense per FAS 123r and also amortization.

Ok so what does flex pay in interest per quarter. About 20mill although the report does not spell it out as it is included with all kinds of non operating below the line stuff including tax credits.

This leaves flex with 55 mill in earnings from operations before tax. Flex tax rate is going up and about 15% now. So flex true earnings after taxes about 47 mill. Wiwth 600 mill shares out you get about 8 cents a share earnings.

This analysis would be similar to most companies results. Flex with all their below the line gaap additions and subtractions from restructuring, tax credits, sale of business etc and their proforma adjustments on stock compensation and amortization make comparisons difficult.

So my conclusion is that flex is doing fiine on rev growth but margins and true operating results still stink. Flex will probably stay between 11 and 12 dollars a share based on this operating performance in my humble opinion.
Rich
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