Flex Ltd (NASDAQ: FLEX) is having an overwhelmingly rough start to the trading session this morning after releasing earnings in the after-hours yesterday. Unfortunately, the earnings showed a drastic decrease on a year over year basis, not mentioning the fact that there are allegations of improper accounting. Of course, upset investors are showing their concerns by sending the stock diving. Today, we’ll talk about:
- The earnings and accounting issues;
- what we’re seeing from the stock as a result;
- and what we’ll be watching for ahead.
FLEX Is Feeling The Pain!
As mentioned above, Flex Ltd. is having an incredibly rough start to the trading session this morning after the company released its earnings late last night. Unfortunately, the release was anything but positive and came coupled with news of allegations surrounding improper accounting. Here’s what we saw:
- Loss – In the earnings report, the first point of disappointment was earnings. During the quarter, the company reported a net loss of $19.6 million, which works out to $0.04 per share. That’s a drastic decline from one year ago. In the same quarter last year, the company generated a profit of $86.9 million, which works out to $0.16 per share. Adjusted earnings per share came to $0.28 which also fell below the FactSet estimate of $0.30 per share.
- Revenue – Revenue proved to be a positive point. During the quarter, analysts expected that the company would generate revenue in the amount of $6.28 billion. However, the company actually reported revenue in the amount of $6.41 billion, showing growth in the amount of 9% year over year.
- Allegations – Finally, in the release, FLEX said that it notified the United States Securities and Exchange Commission surrounding allegations that the company improperly accounted for obligations in a customer contract and certain related revenue. The company said that it will notify the SEC of findings under its independent investigation.
In a statement, Mike McNamara, CEO at FLEX, had the following to offer:
Fiscal 2018 marked a return to revenue growth for Flex and highlighted how our strategy of pursuing portfolio evolution and investing in our Sketch-to-Scale capabilities is driving revenue momentum as we enter fiscal 2019.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dabble in the market is that the news causes moves. In this particular case, the news proved to be overwhelmingly negative. Not only did earnings miss the mark, there are allegations of serious discrepancies in its finances. So, it’s no surprise to see that upset investors are sending the stock screaming for the bottom. Of course, our partners at Trade Ideas were the first to alert us to the gains. At the moment (8:48), FLEX is trading at $13.60 per share after a loss of $3.04 per share or 18.27% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on FLEX. In particular, we’re interested in following the story surrounding the allegations made about the company and the results of the investigation that is currently taking place. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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