With a gain of more than 34% this year, IBD's contract manufacturing industry group is among the 10 best-performing groups. And now Fabrinet (FN), part of the group's upper crust, reports earnings Monday after the close.
Many of the group's companies are reaping rewards from heavy spending in data centers, including group leader Jabil (JBL).
Fabrinet — which specializes in advanced electronics for tech companies — comes into its quarterly report with a tailwind from strong spending in cloud computing. The company owns about 50% of the outsourced optical communications manufacturing market, CEO Seamus Grady said at an investor conference in June.
A Rosenblatt analyst has said contract wins from Amazon.com (AMZN) should be catalysts in the fiscal year that began in July.
Ahead of Monday's report, JPMorgan Chase raised the price target to 318 from 235 for Amazon and kept a neutral rating. Analysts expect upside to second-half 2025 estimates thanks to the robust cloud market, TheFly.com reported. But some end-market drivers are more sensitive to macro trends should be watched.
Analysts' consensus earnings estimate for Fabrinet is $2.43 a share, a 9.5% increase year over year. Sales are expected to climb 17.7% to $883.1 million, according to FactSet. That would extend a trend of sales growth in the teens. By segment, optical sales are seen at about $673 million, and non-optical (the auto, telecom and datacom business) at $209 million.
Fabrinet stock is up nearly 50% year to date and has more than doubled from its April 4 low. The stock has a 97 Composite Rating, and its relative strength line is near highs, according to MarketSurge.
Shares broke past a 281.79 buy point from a cup base on June 25 and are 16% above the entry. A bearish price reversal Wednesday broke the upward stride, but there've been no sell signals. Support appeared at the 21-day exponential moving average Friday.
A few other companies in the industry group have already reported earnings, and the stock reaction has been mixed.
Thinly traded Kimball Electronics (KE) soared nearly 18% Thursday after the company blew by June-quarter expectations, even as sales and earnings fell. The stock rallied nearly 30% this week and is at the highest point since January 2024.
But Flex (FLEX) dipped below the 10-week moving average Friday as it fell for the third week in the past four. The stock has been in retreat since the company reported earnings on July 24. Flex is still up about 27% year to date.
Celestica (CLS) gapped up to an all-time high July 29 after second-quarter sales and earnings beat estimates and it raised its full-year outlook. But the stock has stalled and is now slightly below that day's close.
EPS rose 54% and sales 21% amid heavy demand for Celestica's rack integration services for data centers and connectivity gear that handles AI workloads. It is a key supplier for hyperscalers such as Alphabet (GOOGL) and Meta Platforms (META).
TTM Technologies' (TTM) July 30 earnings report marked the top of a 69% run from a breakout at 30.20 on June 3. The company at that time also announced that CEO Thomas Edman is retiring.
Thursday, the company named Edwin Roks, the former CEO of Teledyne Technologies (TDY), as its new head. Shares slipped below the 50-day moving average Friday. The stock, however, is still 36% above its 30.20 buy point from a June 3 breakout.
Jabil most recently reported quarterly results June 17, when it beat analysts' estimates and raised its full fiscal-year guidance. Executives cited a robust data center business.
The stock climbed as much as 36% from a 170.90 cup-with-handle buy point and has been rangebound for six weeks. The stock fell more than 4% this week and is testing support at the 10-week moving average.
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