Sanmina Surpasses Q4 Estimates with Growth Targets for Fiscal Year 2025

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Sanmina Surpasses Q4 Estimates with Growth Targets for Fiscal Year 2025

Leading integrated manufacturing solutions company Sanmina Corporation (SANM) reported strong fourth-quarter earnings for the period ending November 4, 2024, with revenues reaching $2.02 billion, surpassing the expected range of $1.9 billion to $2.0 billion. The company also exceeded expectations for its non-GAAP earnings per share (EPS), reporting $1.43 compared to the anticipated range of $1.30 to $1.40. Sanmina ended the fiscal year with strong financials, showing $626 million in cash and cash equivalents and no debt, positioning itself well for expected growth in fiscal 2025.

Key Highlights

  • Sanmina's fourth-quarter revenue grew 9.6% sequentially, reaching $2.02 billion.
  • Fourth-quarter non-GAAP EPS of $1.43 surpassed expectations.
  • The company concluded fiscal 2024 with $626 million in cash, no debt, and a 4% sequential decline in inventory.
  • For fiscal 2025, Sanmina expects revenue between $1.925 billion and $2.025 billion and non-GAAP EPS between $1.30 and $1.40.
  • Sanmina is targeting high single-digit revenue growth in fiscal 2025 through diversified markets and new programs.

Company Outlook

Sanmina forecasts revenue for the first quarter of fiscal 2025 to be between $1.925 billion and $2.025 billion, anticipating high single-digit revenue growth for the fiscal year. The company is focused on margin expansion, aiming for an operating margin of 5% to 6% in the near term. Management expresses confidence in strategic positioning and growth opportunities.

Negative Points

  • Non-GAAP EPS decreased by 16% year-over-year in fiscal 2024.
  • Revenue from the cloud segment fell from $1.4 billion to $1.1 billion year-over-year.

Positive Points

  • Non-GAAP EPS increased by 46% compared to fiscal 2021.
  • The company repurchased approximately 945,000 shares worth about $65 million in the fourth quarter.
  • Sanmina returned nearly 100% of its free cash flow to shareholders through share buybacks.
  • Management remains optimistic about growth in high-performance networks and cloud infrastructure.

Drawbacks

The company’s cash conversion cycle currently stands at about 68 days, above the historical average in the mid-50s.

Q&A Highlights

Sanmina is investing in artificial intelligence to enhance manufacturing efficiency and supply chain operations. Its partnership with Reliance Ind in India is progressing well, with Sanmina managing operations while Reliance holds the majority stake. The joint venture is expected to benefit from India's growing position as a major exporter of high-tech products.

Although fiscal 2024 is characterized as a transition period, the company demonstrated resilience by finishing strong and setting a positive trajectory for the upcoming fiscal year. With an emphasis on long-term growth, margin expansion, and a strong commitment to cash flow, Sanmina is diversifying its market presence and investing in new customer acquisition. The company's robust manufacturing capabilities and disciplined cash generation approach underline its business strategy.

Despite the decline in revenue from the cloud segment, management maintains a positive outlook on the sector's recovery. Inventory corrections in the communications segment have concluded, and the company expresses confidence in growth within key customer segments, particularly in optical networking.

Sanmina's focal points for fiscal 2025 include organic growth, strategic acquisitions, and maintaining a strong balance sheet with low debt levels. The company also sees opportunities to improve cash flow through better inventory management and accounts payable practices.

The integration of artificial intelligence into Sanmina's operations over the past 18 months has shown significant growth potential, especially in the communications and cloud sectors. The investment in AI is aimed at enhancing manufacturing efficiency and supply chain operations, given that material costs make up a significant portion of expenses. The joint venture with Reliance Ind represents a strategic move to capitalize on growth opportunities in India, where Reliance holds majority stakes while Sanmina manages operations.

Management, including CEO Jure Sola, expressed confidence in the company's strategic positioning and forward-looking growth opportunities. Stakeholders and investors can expect to see how the company's strategies and investments continue to unfold in the upcoming earnings call in approximately 90 days.

InvestingPro Forecasts

Sanmina Corporation's strong fourth-quarter performance and positive outlook for fiscal 2025 are supported by various key metrics and forecasts derived from InvestingPro. The company's market capitalization stands at $4.03 billion, reflecting its significant presence in the Electronics Equipment, Tools, and Components sector.

According to InvestingPro data, Sanmina's trailing twelve-month revenue as of the fourth quarter of 2024 was $7.57 billion, with gross profit reported at $640.43 million. Despite a 15.3% revenue decline during this period, the company maintains a relatively modest price-to-earnings ratio of 17.55, indicating a solid financial position for a company with growth projections.

One relevant InvestingPro insight emphasizes that Sanmina holds more cash than debt on its balance sheet, consistent with the reported $626 million in cash and absence of debt. This strong liquidity position supports Sanmina’s ability to invest in growth initiatives and return value to shareholders through share buybacks as noted in the earnings report.

Another pertinent InvestingPro hint indicates that management is aggressively repurchasing shares, corroborated by the announcement of approximately $65 million worth of repurchases during the fourth quarter. This strategy underscores management’s confidence in Sanmina's future prospects and commitment to enhancing shareholder value.

InvestingPro analysis also highlights that Sanmina is trading close to its 52-week high and has delivered strong returns over the past five years. This performance is reflected in the company’s year-to-date total return of 41.72%, demonstrating investor confidence in Sanmina's strategic direction and growth potential.

For readers seeking a more comprehensive analysis, InvestingPro offers nine additional insights that can provide further understanding of Sanmina's financial health and market position.

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