Fabrinet stock jumps over 9% after posting guidance above estimates

BANGKOK - Fabrinet (NYSE:FN ) delivered fourth-quarter earnings and revenue that exceeded analyst expectations, while also providing guidance above consensus estimates for the upcoming quarter.

The optical manufacturing services provider saw its shares pop more than 9% after the release. 

For the fourth quarter ended June 28, 2024, Fabrinet posted adjusted earnings per share of $2.41, surpassing the analyst estimate of $2.24. Revenue came in at $753.3 million, beating the consensus projection of $732.63 million and representing a 14.8% increase YoY.

Fabrinet also announced a significant new systems-level contract with Ciena (NYSE:CIEN ), a company that has traditionally been a customer for component-level manufacturing services. While Ciena has not been a major customer in the past, Fabrinet has now secured a "majority share" of Ciena's manufacturing business, including vertically integrated optics. This partnership is expected to expand further with Ciena's upcoming WaveLogic 6 product cycle.

Looking ahead, the company forecast first quarter fiscal 2025 adjusted earnings per share between $2.33 and $2.40, above the $2.25 consensus. Revenue is expected to range from $760 million to $780 million, also topping analyst estimates of $751.9 million.

Seamus Grady, Chief Executive Officer of Fabrinet, commented on the results: "Our strong fourth quarter results capped a remarkable fiscal year, representing our fourth quarter in a row of record revenue, and record earnings per share, both of which were above our guidance ranges."

The company's board of directors approved an expansion of its share repurchase program, authorizing the repurchase of up to an additional $139.5 million of Fabrinet's ordinary shares. This brings the total authorization to $434.3 million, with $200 million currently remaining.

Following the report's release, Jefferies analysts have introduced fiscal 2026 revenue and EPS projections of $3.508 billion and $11.10 per share, respectively. Morever, their new calendar 2026 EPS projection is set at $11.53 per share.

"We think it makes sense for investors to focus on calendar 2026 – which will more fully reflect upside associated with the new Ciena business," they commented, raising the price target on FN shares from $230 to $250.

"We’re inclined to assign a higher-than-typical multiple for the business. That said, it feels like current valuations already price in a very attractive outcome."

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Source: Investing.com