By Sam Boughedda
Investing.com – Diebold Nixdorf (NYSE:), Plexus Corp (NASDAQ:), and Cognex Corp (NASDAQ:) were downgraded to Underweight by a JPMorgan analyst in a research note on Monday.
The analyst downgraded the stocks as they position following second-quarter earnings prints, saying the season has seen more misses and guidance cuts than usual, driven by logistics headwinds and FX. However, they are more concerned with inventory pauses at key customers and cracks in demand trends.
The analyst added that themes such as supply chain headwinds easing, EMS players benefiting from component inflation, consumer technologies pricing in the worst, and high-end consumers remaining relatively resilient have emerged.
On Diebold Nixdorf, the analyst said Q2 earnings came in better than feared though “somewhat low quality” given the elevated restructuring charges taken in the quarter. “Management kept EBITDA and FCF guidance unchanged despite lowered revenue guidance on material FX headwinds. We see elevated risks to hitting guidance, in another heavily back end loaded year. Valuation levels are also at a premium to NCR (NYSE:), despite lower operating profit margins, more complex capital structure issues and limited FCF.”
Meanwhile, JPMorgan (NYSE:) downgraded Cognex following a Q2 print that was “very difficult” on softening demand in Logistics. “Customer concentration risk remains elevated at Amazon (NASDAQ:) and Apple (NASDAQ:), and given pause in logistics spending at Amazon, which drove $300mm in revenues FY21 ~up 65% y/y, we sense we may see multiple years of digestion. Consensus estimates seem a bit high for F4Q22 in our view as aforementioned issues may linger, and given limited guidance provided longer term for this mostly book and ship business, there remains a wide dispersion in estimates in our view,” said the analyst.
Finally, on Plexus, the analyst said it is a “relative call” given that valuation levels have climbed. “We think the fundamentals are great, with PLXS seeing similar tailwinds to the business that FLEX and JBL are enjoying (Component inflation uplift, demand trends for on shoring outsourcing etc.) We look to cash and note that FCF is expected to be down $100mm for FY22 given elevated working cap/capex investments, and we sense a couple more quarters before normalization. FLEX and JBL are generating solid FCF and trading in high single digits FCF yields.”
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