Key Points
- Plexus posted record fiscal third-quarter revenue of $1.305 billion, up 28.2% year over year, beating analyst expectations and driving a bullish Wall Street outlook.
- The company's growth is fueled by a record $4.5 billion pipeline of new programs in defense, data-center power, and semiconductor equipment manufacturing.
- Despite strong momentum, Plexus trades at a rich forward price-to-earnings ratio of about 38, raising valuation risk if growth slows going forward.
- Special Report: WATCH THIS BEFORE DECEMBER 8th!!
For most of its history, Plexus (NASDAQ: PLXS) was the kind of company investors forgot about.
The company, based in Neenah, Wisconsin, builds complex electronics for other firms’ products, from surgical robots to defense radios to the machines that make semiconductors. Its history has been steady, profitable, and a little dull.
Not anymore. Plexus has become a genuine growth story, winning new programs in defense, data-center power, and semiconductor equipment, and its stock has been rewarded accordingly. Analysts rate it a Buy.
The question for investors, though, is whether this is a durable trend or a cyclical boom that is already priced in.
Quarterly Results Show Accelerating Growth
So far, the boom is winning. Plexus's fiscal third-quarter report on July 29 was a record. Revenue jumped 28.2% from a year earlier to $1.305 billion, above analysts’ expectations and 12% up from the prior quarter.
Adjusted earnings per share came in at $2.32, beating Wall Street's $2.13 estimate. On a standard accounting basis, earnings were $1.58 a share, but that figure included a one-time stock compensation charge of 74 cents per share tied to executive retirements.
All 3 Markets Showed Growth
All three of its markets came in higher. Industrial, which includes semiconductor equipment, led the way with a 45% increase in revenue and now makes up nearly half of sales. Sales for aerospace/defense and healthcare/life sciences also grew. Although margins were thin, which is normal for contract manufacturers, they showed improvement from a year ago.
The outlook is also strong. Plexus expects fiscal fourth-quarter revenue of $1.33 billion to $1.38 billion and now expects more than 20% revenue growth for fiscal 2026, a sharp turnaround from fiscal 2025, when revenue was essentially flat.
New Business Drives the Growth Outlook
The bull case rests on new business. Plexus won dozens of new manufacturing programs last quarter, the company reported. That included a program to build battery energy storage systems for data centers, and a sizable batch of aerospace and defense wins that included a naval submarine electronics program.
In fact, its pipeline of potential deals hit a record $4.5 billion, and management says fiscal 2027 revenue growth should exceed its long-term goal of between 9% and 12%, led by defense, space, drones, and semiconductor equipment.
Analysts Remain Bullish on Plexus
Wall Street likes what it sees. Nearly every analyst covering the stock rates it a Buy. In all, of the eight analysts following Plexus, one gives the company a Strong Buy, six place it as a Buy, and there is one Hold.
Even with a runup in price of roughly 83% this year, the average price target still sits narrowly above the current share price of about $266. With a current target of $276.86, that implies about a 3% upside. The highest target price is $330, while the lowest is $195 per share
The board is also backing the story. In late August, directors approved a new $100 million share buyback program that begins once the current one runs out.
A Rich Valuation Raises the Risk
Given it recent numbers and rich pipeline, the most important risk at this point appears to be valuation. Plexus trades at a rich forward price/earnings ratio of about 38, above larger rivals, such as Jabil (NYSE: JBL), Sanmina (NASDAQ: SANM) and Celestica (NYSE: CLS).
That’s a sizable premium for a business that keeps only about 5 cents of operating profit from each dollar of sales. If growth slows, especially in the cyclical semiconductor equipment business, the stock could fall sharply.
There are other yellow flags. Rapid growth led to slightly negative free cash flow last quarter as Plexus invested in inventory and equipment. Its largest customers account for a growing share of revenue, so losing one big program would hurt. Healthcare growth is also expected to cool.
Strong Momentum Faces Its Next Test
These risks, however, have yet to materialize. Plexus is winning share in defense, data-center power, and semiconductor equipment. Its pipeline is at a record, and management expects above-target growth to continue into fiscal 2027.
That is a very different company from the sleepy contract manufacturer investors once overlooked.
What investors should keep in mind, though, is that after such a strong run, the stock leaves little room for error. The next test comes with fiscal fourth-quarter results and a first look at fiscal 2027 in late October.
For investors interested in companies tied to defense spending and the AI infrastructure boom, Plexus is worth a closer look.
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