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Fabrinet (NYSE:FN): Earnings Aftermath And What Deutsche Bank AG (USA) (NYSE:DB) Believes

Boston, MA 05/06/2014 (wallstreetpr) – Fabrinet (NYSE:FN) reported 3Q2014 results that were unpopular with investors. Shares of the company lacked support as investors headed for the exit door. Though the company reported revenue growth and earnings per share that were almost in-line, outlook for the current quarter was not inspiring.

However, even as investors head out of Fabrinet, analysts at Deutsche Bank AG (USA) (NYSE:DB) believe that there is more to the company than is apparent. In other words, the company shows positive prospects that should benefit patient investors. As such, the company need not be judged by a single quarter performance as the market conditions are fast-improving.

Therefore, the rating firm reiterated its “hold” recommendation on the stock but went ahead to adjust its 12-month target price on the stock upwards. As such, the firm expects the company to hit $22 per share, up from the previous estimate of $18 per share.

Explaining reason for hope

According to Deutsche Bank, the demand for the services and products provided by Fabrinet (NYSE:FN) remain stable, although the present market condition seems sluggish. Furthermore, the rating agency observed that 3Q results were better than expected or at least in-line with encouraging improvements across the segments. The firm believes that increasing update of high performance networking products suggests healthy sales growth in the segment.

3Q in numbers

Fabrinet (NYSE:FN) reported revenue of $167.7 million, up 8 percent from the comparable quarter a year earlier. Net income in the quarter was $47.7 million or $1.33 per share.

According to CEO Tom Mitchell, 3Q showed encouraging improvement that also bear testimony to the solid execution in the company. With market conditions showing strong signs of improvement, the CEO is confident that the company will not only maintain its world-class services to the customers but also deliver profitability growth for the benefit of the shareholders.

The company’s so-called encouraging performance was supported by internal improvements that have seen a curb in costs and expenses. The company also promised to increase its efforts to add more clients while retaining the existing ones.

The source of concern

Mr. Mitchell and his executive team did all that was possible to justify 3Q results even though they were not the best that the company could produce, but there was little justification for the soft 4Q outlook. The company expects revenue in the current quarter to be between $169 and $173 million and earnings to come between 33 and 35 cents per share.

Analysts expect EPS of 39 cents per share and revenue of $174.1 million.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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