What is driving Plexus Corp. (NASDAQ: PLXS) stock

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Plexus Corp. (NASDAQ: PLXS) stock rose over 2% on 23rd July, 2020 (as of 12:38 pm GMT-4; Source: Google finance) driven by better than expected results for the third quarter of FY 20. The company had Cash of approximately $300 million, which was sequentially higher by $73 million while the short-term debt increased $38 million. In May, the company had executed a 364-day term loan with several of the credit facility banks. The company had secured $138 million through this offering. With the amount raised, the company repaid existing borrowing under the revolving credit facility. At the end of the fiscal third quarter, there was no outstanding borrowing under this facility, therefore allowing the company the full use of the $350 million facility. Further, during the fiscal third quarter, the company has delivered a return on invested capital of 12.9%.  This equates to an economic return of 410 basis points above the weighted average cost of capital.  The increase in fiscal third quarter revenue and improvements in the inventory management contributed to an eight day sequential improvement in the fiscal third quarter cash cycle days.  The company has generated $37 million of free cash flow during the third quarter.

Moreover, during the third quarter of FY 20, the company had won 35 manufacturing programs, which represents an expected $252 million in annualized revenue when fully ramped into production. Trailing four quarter wins total of projected $868 million in annualized revenue when fully ramped into production

PLXS in the third quarter of FY 20 has reported the adjusted earnings per share of $1.20, beating the analysts’ estimates for the adjusted earnings per share of 75 cents. The company had reported the adjusted revenue of $857 million in the third quarter of FY 20, beating the analysts’ estimates for revenue of $801.95 million.

For the fiscal fourth quarter, the company expects revenue to be in the range of $850 to $890 million, versus the consensus of $820.52 million and expects GAAP diluted EPS to be in the range of $1.05 to $1.20, versus the consensus of $0.89. This is after taking consideration known constraints with the global supply chain and workforce challenges that could occur due to COVID-19. However, the forecasts assumes no large scale closures of the company’s facilities, or those of the suppliers or customers, due to COVID-19, nor does it assume that the COVID-19 outbreak will materially impact end markets beyond what has already occurred.

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