Sanmina tumbles as ongoing customer inventory adjustments impact Q4 revenue

Sanmina (SANM) shares plunged more than 14% Tuesday after its latest earnings release missed consensus expectations.

The company reported Q4 EPS of $1.42, $0.03 worse than the analyst estimate of $1.45. Revenue for the quarter came in at $2.05 billion, down 7% YoY but below the consensus estimate of $2.15 billion.

Revenue for the fourth quarter was impacted by ongoing customer inventory adjustments, primarily in the communications end-market, the company stated.

Looking ahead, Sanmina sees Q1 2024 adjusted EPS between $1.20 and $1.30, versus the consensus of $1.45, with revenue for the period from $1.85 billion to $1.95 billion, versus the consensus of $2.23 billion.

Reacting to the report, analysts at Craig-Hallum maintained a Buy rating and $62 price target on the stock but noted that inventory corrections at communications customers are impacting near-term results.

“Sanmina reported Q4 (Sep) results and guided Q1 below expectations. The lower-than-expected results and guidance are primarily being driven
by inventory corrections at the company’s Communication Networks customer base,” the analysts explained.

“Sanmina expects the headwinds in its Communication Networks business, which was 35% of revenue in Q4, to persist through the 1H of FY24, along with the company becoming more cautious on broad-based demand given macro conditions,” they added. “That being said, management is optimistic that following an expected softer 1H FY24 that business should recover in the 2H, we believe back to a potential return to year-over-year growth by Q4 FY24.”