Benchmark Electronics rallies on earnings beat, margin expansion
Non-GAAP EPS of $0.61 topped guidance as operating margin exceeds 5%
Benchmark Electronics Inc. shares surged nearly 4% Thursday after the electronics manufacturer reported better-than-expected quarterly results and demonstrated continued margin improvement, giving investors confidence in the company's operational turnaround.
The Tempe, Arizona-based company reported fiscal fourth-quarter revenue of $657 million, in line with its guidance range, while non-GAAP earnings per share of $0.61 exceeded the high end of management's outlook. Analysts had expected earnings of approximately $0.53 per share, according to data compiled from the company's guidance.
Perhaps more importantly for investors, Benchmark's non-GAAP operating margin reached 5.1%, a key threshold the company has targeted as part of its efficiency initiatives. The gross margin expanded to 10.4%, continuing a year-over-year trend of improvement attributed to cost reductions across manufacturing sites and a favorable revenue mix.
"We delivered our seventh consecutive quarter of positive free cash flow," Benchmark stated in its earnings release, highlighting the company's ability to generate cash even as it navigates challenging market conditions in certain segments.
For the full fiscal year 2024, Benchmark generated $156 million in free cash flow and reduced its inventory by more than $130 million, demonstrating significant progress in working capital management. The company's non-GAAP earnings per share for the year reached $2.29.
The earnings beat and margin expansion helped offset ongoing softness in the medical and advanced computing & communications segments. Strong performance in the semiconductor capital equipment, aerospace and defense, and industrial markets provided crucial offsets, showcasing the benefits of Benchmark's diversified customer base across critical industries.
Looking ahead, management provided first-quarter 2025 guidance of revenue between $620 million and $660 million, with non-GAAP diluted earnings per share expected in the range of $0.48 to $0.54. More significantly, executives indicated they expect a return to revenue growth in 2025, driven by continued margin expansion and strategic investments aimed at capturing emerging opportunities in key markets.
Analysts have taken note of Benchmark's progress. Lake Street and Needham have raised their price targets and reiterated buy ratings in recent weeks, reflecting growing confidence in the company's operational momentum and strategic positioning in the aerospace, defense, and medical technology sectors.
Benchmark's shares have rallied approximately 17% over the past three months, outpacing broader market indices as investors reward the company's improving profitability metrics and consistent cash generation. The stock now trades near 52-week highs, having recovered from lows around $30 earlier in the year.
The company serves as a critical manufacturing partner for some of the world's most demanding industries, providing engineering services and advanced manufacturing solutions for complex electronic systems. Its aerospace and defense exposure has proven particularly valuable as governments increase spending on military and space programs, while the semiconductor equipment market has shown resilience despite broader industry volatility.
Investors will be watching closely to see whether Benchmark can sustain its margin momentum and successfully translate its efficiency gains into consistent revenue growth throughout 2025, factors that could determine whether the recent rally has further room to run.