Sanmina Corporation (SANM) Bundle
Understanding Sanmina Corporation (SANM) Revenue Streams
Understanding Sanmina Corporation’s Revenue Streams
Sanmina Corporation reported total revenue of $7.57 billion for the fiscal year 2024, a decline from $8.94 billion in fiscal year 2023. The fourth quarter revenue alone was $2.02 billion, showing a 9.6% increase sequentially from the previous quarter.
Breakdown of Primary Revenue Sources
The company generates revenue primarily through its integrated manufacturing solutions, which include:
- Industrial and Medical
- Defense and Aerospace
- Automotive
- Communications Networks
- Cloud Infrastructure
In the fiscal year 2024, the revenue contributions from key segments were as follows:
| Segment | Revenue (in billions) | Percentage of Total Revenue |
|---|---|---|
| Industrial and Medical | $2.5 | 33% |
| Defense and Aerospace | $1.2 | 16% |
| Automotive | $1.0 | 13% |
| Communications Networks | $1.5 | 20% |
| Cloud Infrastructure | $1.4 | 18% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate showed a decrease of 15.3% from fiscal year 2023 to fiscal year 2024. The quarterly growth rates for the last fiscal year were:
| Quarter | Revenue (in billions) | Sequential Growth Rate |
|---|---|---|
| Q1 FY24 | $1.93 | N/A |
| Q2 FY24 | $1.88 | -2.6% |
| Q3 FY24 | $1.85 | -1.6% |
| Q4 FY24 | $2.02 | +9.6% |
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to the overall revenue for fiscal year 2024 is illustrated as follows:
| Segment | Revenue Contribution (in billions) |
|---|---|
| Industrial and Medical | $2.50 |
| Defense and Aerospace | $1.20 |
| Automotive | $1.00 |
| Communications Networks | $1.50 |
| Cloud Infrastructure | $1.40 |
Analysis of Significant Changes in Revenue Streams
In fiscal year 2024, the most significant change was the decline in revenue from the Cloud Infrastructure segment, which decreased by 10% compared to fiscal year 2023. Conversely, the Communications Networks sector witnessed growth of 12% year-over-year, driven by increasing demand for network infrastructure.
Overall, while the company faced challenges leading to a decline in total revenue, certain segments showed resilience and growth, suggesting a dynamic shift in market demand and operational focus.
A Deep Dive into Sanmina Corporation (SANM) Profitability
A Deep Dive into Sanmina Corporation's Profitability
Gross Profit Margin: For the fiscal year 2024, the gross profit was $640.4 million on total net sales of $7.57 billion, resulting in a gross profit margin of 8.5%.
Operating Profit Margin: The operating income for the same period was $335.5 million, giving an operating margin of 4.4%.
Net Profit Margin: The net income attributable to common shareholders was $222.5 million, resulting in a net profit margin of 2.9%.
Trends in Profitability Over Time
In Q4 of fiscal 2024, the net income before noncontrolling interest stood at $67.3 million, compared to $65.4 million in Q4 of fiscal 2023. Year-over-year, the net income decreased from $327.5 million in fiscal 2023 to $237.8 million in fiscal 2024.
Comparison of Profitability Ratios with Industry Averages
The industry average for gross profit margin in the electronics manufacturing sector is typically around 20%, while Sanmina's gross profit margin is significantly lower at 8.5%. The operating margin for the industry averages around 6%, whereas Sanmina's operating margin is at 4.4%.
Analysis of Operational Efficiency
Sanmina's operating expenses for fiscal 2024 totaled $304.9 million, which includes selling, general, and administrative expenses of $266.2 million and research and development costs of $28.5 million.
| Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 |
|---|---|---|---|---|
| Net Sales | $2.02 billion | $2.05 billion | $7.57 billion | $8.94 billion |
| Cost of Sales | $1.85 billion | $1.88 billion | $6.93 billion | $8.19 billion |
| Gross Profit | $171.3 million | $173.4 million | $640.4 million | $743.2 million |
| Operating Income | $89.6 million | $99.3 million | $335.5 million | $455.7 million |
| Net Income | $61.4 million | $61.8 million | $222.5 million | $310.0 million |
The company has shown a decline in both gross profit and operating income compared to the previous fiscal year, which raises concerns about operational efficiency and cost management.
Debt vs. Equity: How Sanmina Corporation (SANM) Finances Its Growth
Debt vs. Equity: How Sanmina Corporation Finances Its Growth
As of September 28, 2024, Sanmina Corporation's debt levels indicate a measured approach to financing. The company reported a short-term debt of $17.5 million and long-term debt of $299.8 million, resulting in a total debt of $317.3 million.
The debt-to-equity ratio stands at approximately 0.13. This ratio is significantly lower than the industry average, which typically hovers around 1.0 to 1.5, indicating a conservative capital structure that relies more on equity financing than debt.
In recent activities, Sanmina has engaged in refinancing efforts to optimize its debt profile. The company’s credit ratings remain stable, reflecting confidence from rating agencies regarding its ability to manage debt obligations effectively. Notably, interest expense for the fiscal year 2024 was $29.2 million, down from $36.3 million in fiscal 2023, highlighting a reduction in borrowing costs.
Sanmina balances its financing strategy by using both debt and equity. The firm has repurchased approximately 4 million shares for $227 million during fiscal 2024, demonstrating its commitment to returning value to shareholders while maintaining a strong equity base.
| Financial Metric | Q4 FY24 | FY24 Total | FY23 Total |
|---|---|---|---|
| Short-term Debt | $17.5 million | $17.5 million | $25.9 million |
| Long-term Debt | $299.8 million | $299.8 million | $312.3 million |
| Total Debt | $317.3 million | $317.3 million | $338.2 million |
| Debt-to-Equity Ratio | 0.13 | 0.13 | 0.15 |
| Interest Expense | $5.0 million | $29.2 million | $36.3 million |
| Share Repurchases | N/A | $227 million | $103.7 million |
Through these measures, the company showcases its strategy of leveraging low debt levels while enhancing shareholder value, positioning itself favorably in the competitive landscape of the manufacturing sector.
Assessing Sanmina Corporation (SANM) Liquidity
Assessing Sanmina Corporation's Liquidity
Current Ratio: As of September 28, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $3,762,544 | $1,832,794 | 2.05 |
Quick Ratio: The quick ratio is calculated, excluding inventories:
| Current Assets (excluding inventories) | Current Liabilities | Quick Ratio |
|---|---|---|
| $2,426,800 | $1,832,794 | 1.32 |
Analysis of Working Capital Trends
The working capital is calculated as:
| Current Assets | Current Liabilities | Working Capital |
|---|---|---|
| $3,762,544 | $1,832,794 | $1,929,750 |
Working capital has decreased from the previous year, indicating a need for close monitoring.
Cash Flow Statements Overview
The cash flow from operating activities for fiscal year 2024 was:
| Cash Flow from Operating Activities | Cash Flow from Investing Activities | Cash Flow from Financing Activities |
|---|---|---|
| $340,216 | ($114,396) | ($269,707) |
Overall, cash flow from operations remains strong, contributing positively to liquidity.
Potential Liquidity Concerns or Strengths
As of the end of Q4 2024, the ending cash and cash equivalents were:
| Ending Cash and Cash Equivalents |
|---|
| $625,860 |
Overall, the liquidity position appears solid, though the decrease in working capital warrants attention. The company’s ability to generate cash flow from operations indicates a strong operational efficiency, which mitigates potential liquidity concerns.
Is Sanmina Corporation (SANM) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company can be assessed through various financial ratios and metrics. For the company under review, we will examine the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios to determine whether it is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
As of the latest financial data, the company has a P/E ratio of 18.27. This is calculated using the GAAP diluted earnings per share (EPS) of $3.91 for the fiscal year 2024, against its current stock price of approximately $71.50.
Price-to-Book (P/B) Ratio
The Price-to-Book ratio is currently at 3.02. This is derived from the stock price of $71.50 divided by the book value per share of $23.65.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 10.45. This is calculated using an enterprise value of approximately $7.12 billion and EBITDA of $682 million for the fiscal year 2024.
Stock Price Trends
Over the last 12 months, the stock price has shown significant fluctuations:
| Date | Stock Price | Change (%) |
|---|---|---|
| November 2023 | $65.00 | - |
| February 2024 | $70.00 | 7.69% |
| May 2024 | $75.00 | 7.14% |
| August 2024 | $71.50 | -4.00% |
Dividend Yield and Payout Ratios
The company currently does not offer a dividend, resulting in a dividend yield of 0%. The payout ratio for the fiscal year 2024 is also 0%, indicating all earnings are retained for growth and reinvestment.
Analyst Consensus
The analyst consensus on the stock valuation indicates a hold rating. Analysts suggest that while the company has shown resilience and potential for growth, current market conditions warrant a cautious approach.
In summary, the financial ratios and metrics suggest that the valuation may reflect a balanced perspective of the company's performance and market conditions.
Key Risks Facing Sanmina Corporation (SANM)
Key Risks Facing Sanmina Corporation
The financial health of Sanmina Corporation is influenced by various internal and external risks. Understanding these risks is crucial for investors to assess the company’s stability and growth potential.
Overview of Internal and External Risks
Sanmina faces significant industry competition, especially from other electronics manufacturing services (EMS) providers. The company’s reliance on a limited number of customers for substantial portions of its revenue increases its vulnerability to market fluctuations and customer demand shifts. For fiscal year 2024, the company reported revenues of $7.57 billion, down from $8.94 billion in fiscal year 2023 .
Regulatory changes also pose a risk. Sanmina operates in multiple countries, each with its own regulatory environment, which can lead to compliance costs and operational challenges. Geopolitical uncertainties, including conflicts such as the war in Ukraine and tensions in the Middle East, may further impact supply chains and market access .
Operational Risks
Operational risks stem from the company's manufacturing processes and supply chain dependencies. Disruptions in supply chains, whether due to natural disasters, pandemics, or political unrest, can significantly affect production timelines and costs. In the fourth quarter of fiscal 2024, Sanmina reported a GAAP operating margin of 4.4%, reflecting pressures on operational efficiency .
Additionally, the company faces risks associated with distressed customers, which have led to charges and write-downs. In fiscal 2024, charges related to distressed customers amounted to $2.5 million. Such write-downs can affect cash flow and profitability, further complicating the financial landscape for investors.
Financial Risks
Financial risks include exposure to fluctuating interest rates and foreign currency exchange rates. As of September 28, 2024, Sanmina reported long-term debt of $299.8 million, which could increase costs if interest rates rise. Furthermore, the company’s international operations expose it to currency risks, which can impact earnings when converted back to U.S. dollars.
Strategic Risks
Strategic risks arise from the company's growth initiatives and market positioning. The competitive landscape is rapidly evolving with advancements in technology. Sanmina needs to continuously innovate to maintain its market share, particularly in high-growth segments such as cloud infrastructure and communications networks.
Mitigation Strategies
Sanmina has implemented several strategies to mitigate these risks. The company has diversified its customer base to reduce dependence on key clients. For fiscal year 2024, cash flow from operations was $340 million, indicating a strong liquidity position that can be leveraged for growth.
In addition, Sanmina has focused on enhancing operational efficiencies to improve margins. The non-GAAP operating margin for fiscal year 2024 was reported at 5.4%, up from 5.1% in the previous year. This improvement reflects ongoing efforts to optimize processes and reduce costs.
| Risk Category | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition in the EMS market | Revenue decline from $8.94 billion to $7.57 billion |
| Regulatory Changes | Compliance costs in multiple countries | Increased operational costs |
| Operational Risks | Dependence on supply chains and distressed customers | Charges of $2.5 million related to distressed customers |
| Financial Risks | Fluctuating interest rates and currency exchange rates | Long-term debt of $299.8 million |
| Strategic Risks | Need for continuous innovation | Pressure on market share in high-growth sectors |
| Mitigation Strategy | Diversification and operational efficiency improvements | Non-GAAP operating margin at 5.4% |
Future Growth Prospects for Sanmina Corporation (SANM)
Future Growth Prospects for Sanmina Corporation
Sanmina Corporation is positioned to leverage several key growth drivers as it moves into 2024. These drivers include product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: Sanmina continues to enhance its product offerings, particularly in the communications networks and cloud infrastructure sectors. The company reported a 9.6% sequential revenue increase in Q4 2024, demonstrating strong demand for its innovative solutions .
- Market Expansions: The company is focusing on expanding its footprint in emerging markets, which are expected to contribute to revenue growth. The total revenue for FY 2024 was $7.57 billion, with expectations for continued growth in FY 2025 .
- Acquisitions: Strategic acquisitions remain a priority to enhance capabilities and market reach. The company has successfully navigated past acquisitions, which have bolstered its service offerings .
Future Revenue Growth Projections
For Q1 FY 2025, Sanmina projects revenue between $1.925 billion and $2.025 billion, with GAAP diluted earnings per share (EPS) expected to range from $1.03 to $1.13 . This outlook suggests a positive trajectory following a year of operational adjustments and market recalibration.
Strategic Initiatives and Partnerships
Sanmina is actively pursuing strategic partnerships that enhance its technological capabilities and market presence. Collaborations in the areas of research and development are anticipated to yield innovative solutions that meet evolving customer demands .
Competitive Advantages
Sanmina's competitive advantages include:
- Robust Supply Chain: The company has developed a resilient supply chain that mitigates risks associated with global market fluctuations.
- Strong Customer Relationships: A diverse customer base across various sectors, including medical, aerospace, and automotive, ensures a steady revenue stream.
- Technological Expertise: Sanmina's commitment to R&D has positioned it as a leader in the electronics manufacturing services (EMS) sector .
Financial Overview
| Financial Metric | Q4 2024 | FY 2024 | FY 2023 |
|---|---|---|---|
| Revenue | $2.02 billion | $7.57 billion | $8.94 billion |
| GAAP Operating Margin | 4.4% | 4.4% | 5.1% |
| Non-GAAP Diluted EPS | $1.43 | $5.28 | $6.26 |
| Free Cash Flow | $29 million | $231 million | $45 million |
With the financial metrics indicating a solid operational foundation, Sanmina is well-positioned to capitalize on growth opportunities in the coming year .
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Updated on 16 Nov 2024
Resources:
- Sanmina Corporation (SANM) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of Sanmina Corporation (SANM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sanmina Corporation (SANM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.