Multi-Fineline Electronix, Inc. tumbling on downgrade and Q3 loss
Shares of Multi-Fineline Electronix, Inc. (Nasdaq: MFLX) are continuing to free fall today after Robert W. Baird downgraded the provider of flexible printed circuit and component assembly solutions to the electronics industry to a rating of “neutral” from “out perform.” After the close Thursday Multi-Fineline reported that it swung to a loss below expectations for its fiscal third quarter.
“While we are encouraged by the diversification of M-Flex's customer base with the increasing revenues to Sony-Ericsson and a third customer, we are downgrading MFLX rating to Neutral based on anticipated margin pressure,” Robert W. Baird analyst Reik Read wrote in a research note.
Read cited product transitions, possible price concessions sought by Motorola and new programs that carry higher commission costs as factors that could squeeze margins.
On account of possibly softening margins, Read says he is reducing his full year EPS estimate to $0.15 from $0.35, and his fiscal year 2008 EPS estimate to $0.42 from $0.80. The consensus of three analysts polled by Thomson Financial was $0.35 for the current fiscal year ending in September 2007, while the consensus of five analysts polled by Thomson Financial is $0.83 for fiscal year 2008.
For the three months ended June 30, the Anaheim, Calif.-based company recorded a net loss of $6.7 million, or $0.27 per diluted share, while three analysts polled by Thomson Financial had anticipated a net loss of $0.02 per share. This compares with net income of $8.3 million, or $0.32 per share earned in the fiscal third quarter last year.
Excluding a one-time charge of $7.8 million before tax to expense transaction costs related to Multi-Fineline’s attempt to acquire MFS Technology Ltd., the net loss for the quarter was $1.9 million, or $0.08 per share.
In June of this year, Multi-Fineline’s offer to acquire MFS Technology Ltd. was squashed after WBL Corp. Ltd. said that its shareholders voted against selling its MFS Technology shares to Multi-Fineline. Approval of WBL shareholders was a pre-condition for Multi-Fineline to acquire MFS Technology.
Net sales for the quarter declined 20% to $104.1 million, from $130.3 million for the third quarter of fiscal 2006.
According to Multi-Fineline’s CEO, the company’s third quarter revenues declined substantially more than expected on account of lower sales to the company’s largest customer. Specifically, revenue from the company's largest customer decreased 52% to represent 50% of net sales for the third quarter, compared with 84% in the same period last year.
Shares of Multi-Fineline were down 28%, or $3.89, to $9.99 in mid-day trading.
