Sanmina Conference Call Summary Company Overview - **Company**: Sanmina (NasdaqGS: SANM) - **Business Focus**: Global leader in design and manufacturing solutions, primarily in heavily regulated markets and complex products, avoiding the consumer space. Key sectors include communication networks, cloud infrastructure, medical, aerospace and defense, industrial, and energy [4][5][6]. Financial Performance - **Fiscal Year 2025 Revenue**: Approximately $8.1 billion, with high single-digit growth [5]. - **Cash Generation**: Generated about $621 million in cash [5]. - **Revenue Breakdown**: - Communication networks and cloud infrastructure: ~40% (~$3.1 billion) [6][23]. - Industrial, energy, medical, aerospace, defense, and automotive: ~60% (~$5 billion) [10]. Business Segments 1. Communication Networks and Cloud Infrastructure - **Growth**: High double-digit growth, with approximately 20% year-over-year growth [24]. - **Key Products**: Optical modules, transceivers, and data center networking equipment [23][24]. - **Acquisition Impact**: Recent acquisition of ZT Systems expected to enhance capabilities in cloud infrastructure and AI [8][25]. 2. Industrial and Energy - **Performance**: Mixed results; energy sector performing well with projects in power storage and controls, while industrial sector showing varied performance [12][13]. - **Customer Outlook**: Improved visibility with stable forecasts from customers [11]. 3. Medical - **Market Participation**: Engaged in a wide range of medical products from large hospital equipment to wearables [14]. - **Growth Outlook**: Low single-digit growth in FY2025, with expectations for improvement in the second half of FY2026 [15]. 4. Aerospace and Defense - **Business Mix**: Focused on U.S. Department of Defense and commercial aerospace, with stable performance expected due to long-term contracts [16][17]. 5. Automotive - **Focus**: Primarily on electric vehicles (EVs), with growth driven by expanding product offerings [19][20]. - **Market Dynamics**: Anticipated improvement in the second half of FY2026 despite broader automotive market challenges [20]. Acquisition of ZT Systems - **Acquisition Details**: Closed at the end of October 2025 for approximately $2 billion, with expected revenue contribution of $5.7 billion annually [28][36]. - **Strategic Partnership**: Collaboration with AMD for design engineering and manufacturing [35]. - **Growth Potential**: Focus on accelerated compute and storage solutions for hyperscalers and OEMs [34][36]. Financial Outlook - **FY1Q26 Guidance**: Legacy Sanmina revenue expected to be flat sequentially but up 5% year-over-year, with high single-digit growth anticipated throughout FY26 [45]. - **Operating Margin Targets**: Near-term target of high 5s to low 6%, with long-term goal of 6%-7% [48][51]. - **Free Cash Flow**: Generated $621 million in cash flow from operations last year, with a strong balance sheet to support growth [56][60]. Capital Allocation and Future Strategy - **M&A Appetite**: Open to future acquisitions that align with growth strategy while maintaining leverage ratios [63]. - **Share Buybacks**: Currently on hold, with focus on growth and capital allocation strategies [65]. Conclusion - **Company's Position**: Sanmina is well-positioned for growth with a strong legacy business and the recent acquisition of ZT Systems, which is expected to transform the company and expand its market reach [68].

Investment Opportunities - Ryan Kelley, chief investment officer of Hennessy Funds, has outperformed 99% of peers over the last five years with his funds [1] - Kelley highlights Sanmina Corporation (SANM) and Dycom Industries (DY) as key holdings in the mid-cap fund, benefiting from the AI infrastructure boom [2] Company Insights - Sanmina manufactures essential components for data centers, with a market cap of approximately $8.5 billion [3] - The company recently acquired ZT Systems from AMD, enhancing its position in the industry, and trades at a forward P/E ratio of 35, slightly above the Nasdaq 100 average of 33 [4] - Dycom specializes in installing fiber optic networks, with a market cap of $10.4 billion and a forward P/E ratio of 45, reflecting a 93% stock increase over the past year [5][6] Market Trends - The demand for data centers and fiber optic networks is expected to grow significantly as hyperscalers invest heavily, with companies like Sanmina and Dycom positioned to benefit from this trend [2][6] - Kelley notes that even if AI's potential is uncertain, companies involved in the supporting infrastructure will still see growth [3][6]

Core Insights - The artificial intelligence sector is seeing renewed investor interest as the Nasdaq attempts to recover above its 50-day moving average heading into December [1] - Strong earnings growth and anticipated Federal Reserve interest rate cuts are supporting a bullish outlook for the stock market, encouraging investors to re-enter [2] - Investors are advised to focus on stocks that have demonstrated resilience in the current market environment rather than on beaten-down stocks [3] Stock Screening Methodology - A screening method using the Research Wizard identifies Zacks Rank 1 (Strong Buy) stocks, narrowing down to those with upward price momentum and trading within 20% of their 52-week highs [4][5] - The screening criteria include a PEG ratio of less than or equal to 1, a Price to Sales ratio of less than or equal to 3, and a percentage price change over the last 12 weeks [8] Featured Stock: Sanmina Corporation (SANM) - Sanmina Corporation is highlighted as a leading integrated manufacturing tech solutions firm, recently acquiring ZT Systems to enhance its capabilities in the Cloud and AI markets [6][7] - The company reported a 7% increase in sales and a 14% rise in adjusted earnings year-over-year for Q4 FY25, with projections indicating a 72% revenue increase in FY26 and a 60% boost in adjusted earnings [9][10] - SANM stock has appreciated 100% in 2025 and 560% over the past decade, outperforming the tech sector's 405% growth [11]

Core Insights - The article emphasizes the importance of utilizing Zacks Premium for both new and experienced investors to enhance their stock market strategies and confidence in investing [1] Zacks Style Scores - Zacks Style Scores provide a unique rating system for stocks based on value, growth, and momentum, serving as complementary indicators to the Zacks Rank [2] - Stocks are rated from A to F, with A indicating the highest potential for outperforming the market [3] Value Score - The Value Style Score focuses on identifying undervalued stocks by analyzing financial ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - The Growth Style Score assesses a company's financial health and future outlook, considering projected and historical earnings, sales, and cash flow to identify stocks with sustainable growth potential [4] Momentum Score - The Momentum Style Score helps investors capitalize on price trends by analyzing short-term price changes and earnings estimate revisions [5] VGM Score - The VGM Score combines the Value, Growth, and Momentum Scores to identify stocks with the best overall potential, making it a valuable tool alongside the Zacks Rank [6] Zacks Rank - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +23.93% since 1988, significantly outperforming the S&P 500 [7] - There are typically over 800 stocks rated 1 or 2, making it essential for investors to utilize Style Scores to narrow down their choices [8] Stock Highlight: Sanmina Corporation - Sanmina Corporation, based in San Jose, CA, specializes in electronics contract manufacturing and offers comprehensive supply chain solutions across various sectors, including industrial, medical, and automotive [11] - Sanmina holds a 1 (Strong Buy) rating on the Zacks Rank and has a VGM Score of A, indicating strong growth potential with a forecasted year-over-year earnings growth of 59.6% for the current fiscal year [12] - The company has seen positive revisions in earnings estimates, with the Zacks Consensus Estimate increasing from $7.94 to $9.64 per share, and an average earnings surprise of +5.4% [12][13]

Revenue Composition - Integrated Manufacturing Solutions (IMS) generated approximately 80% of total revenue in 2025[14] - Components, Products and Services (CPS) accounted for about 20% of total revenue in 2025[14] - Sales to the ten largest customers represented 52% of net sales in 2025, indicating a significant reliance on major clients for revenue generation[67] - Sales to the ten largest customers historically represent approximately 50% of net sales, indicating a reliance on a small number of customers for revenue[105] - Approximately 80% of net sales are generated from products manufactured in foreign operations, reflecting a strategy to leverage lower-cost manufacturing locations[191] Market Focus and Strategy - The company targets high-growth markets such as industrial, medical, defense and aerospace, and automotive, which require higher value-added services[25] - The company aims to increase the number of manufacturing programs with multiple solutions to improve margins and profitability[18] - The company emphasizes attracting long-term partnerships with growth industry leaders to leverage its advanced electronics manufacturing capabilities[23] - The company is committed to pursuing strategic transactions to access new customers and technologies[26] - The company aims to diversify into mission-critical markets and develop higher technology products with longer life cycles to drive future growth[194] Manufacturing and Technology - The company is focused on extending technology capabilities and enhancing manufacturing processes to provide a competitive advantage[19] - The global manufacturing network allows the company to offer flexibility and optimize costs for customers[36] - The company provides integrated manufacturing solutions including Printed Circuit Board Assembly (PCBA) and testing, focusing on technologies like surface mount technology (SMT) and pin-through-hole assembly (PTH) to meet customer needs for complex electronic systems[43] - The company emphasizes a vertically integrated manufacturing strategy, providing end-to-end solutions that include product design, engineering, and post-manufacturing services[62] - The company plans to continue investing in factory automation, process improvements, and artificial intelligence to enhance operational efficiency[191] Workforce and Employment - The company has approximately 39,000 employees, with 55% in the Americas, 36% in APAC, and 9% in EMEA[80][81] - The average tenure of employees is approximately eight years, with about 30% having been employed for over ten years[89] - Approximately 49% of the global workforce is female, and non-Caucasian employees account for approximately 60% of the U.S. employee base[91] - Recruiting and retaining key personnel is critical for growth, with challenges in the current employment market[150] Environmental and Regulatory Compliance - The company operates globally with a focus on compliance with environmental regulations, including wastewater treatment systems at PCB manufacturing plants[72] - The company is subject to complex regulations regarding export controls and government contracts, which require extensive compliance efforts and could lead to significant penalties if violated[79] - The company has implemented standardized environmental management systems across manufacturing facilities, with nearly all certified under ISO 14001[74] - Environmental liabilities have been incurred due to acquisitions, with ongoing investigations and remediation activities at several sites, including locations in New York and California[77] - The company operates under environmental permits that require periodic renewal and are subject to revocation for violations, which could adversely affect production[76] Financial Performance and Risks - The company has never declared or paid cash dividends and plans to retain future earnings for operations, business expansion, and debt repayments[181] - The company's liquidity is dependent on factors such as profitability, business volume, and the timing of acquisitions, with no assurance that additional liquidity will be available on acceptable terms if needed[130] - The company faces significant uncertainties in operating results due to factors such as intense competition, regulatory changes, and supply chain disruptions[101][102] - The company is exposed to risks from fluctuations in currency exchange rates, which may affect operating costs[107] - Changes in financial accounting standards could significantly affect the company’s reported financial results and require adjustments to estimates and assumptions[125] Acquisitions and Investments - The company acquired the data center infrastructure manufacturing business of ZT Systems in October 2025, aiming to enhance its capabilities in large-scale data center rack deployments[137] - The acquisition of ZT Group Int'l, Inc. (ZT Systems) was completed for an aggregate consideration of $1.6 billion, including $1.46 billion in cash and contingent cash consideration of up to $450 million based on financial metrics[195] - The acquisition of ZT Systems involves risks such as integration difficulties, quality issues, and potential loss of key employees, which could impact profitability[140] - Future divestitures may reduce revenue and margins, with risks of retained liabilities from divested operations[141] Cybersecurity and Operational Risks - Cybersecurity measures may not be sufficient to protect sensitive data, exposing the company to legal liability and reputational damage[121] - The company’s operations could be disrupted by cyberattacks, which may lead to significant losses and impact customer relationships[121] - The company experienced a temporary disruption in worldwide manufacturing operations due to a misconfigured system update by a network security vendor in July 2024[120] Tax and Financial Liabilities - Changes in tax rates and audits could increase tax expenses, potentially reducing net income; cumulative net operating loss carryforwards as of September 27, 2025, are $200 million for state and $481 million for foreign[146] - The effective tax rate is influenced by the geographic distribution of income, tax regulations, and the effectiveness of tax planning strategies[210] - The company estimates its income tax provision based on various factors, including past experience and tax law interpretations, with a focus on maintaining adequate accruals for tax liabilities[206]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, with the aim of buying high and selling higher, capitalizing on established price movements [1] Company Overview: Sanmina (SANM) - Sanmina currently holds a Momentum Style Score of B, indicating a favorable momentum characteristic [2] - The company has a Zacks Rank of 1 (Strong Buy), suggesting strong potential for outperformance in the market [3] Performance Metrics - Over the past week, Sanmina's shares have increased by 24.27%, significantly outperforming the Zacks Electronics - Manufacturing Services industry, which rose by only 0.68% [5] - In a longer timeframe, Sanmina's shares have risen by 39.15% over the past month, compared to the industry's 21.64% [5] - Over the last three months, Sanmina's shares have increased by 48.56%, and they have surged by 109.2% over the past year, while the S&P 500 has only moved 7.27% and 15.21% respectively [6] Trading Volume - Sanmina's average 20-day trading volume is 767,784 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, two earnings estimates for Sanmina have been revised upwards, while none have been revised downwards, leading to an increase in the consensus estimate from $6.94 to $9.64 [9] - For the next fiscal year, one estimate has moved upwards with no downward revisions noted [9] Conclusion - Given the strong performance metrics and positive earnings outlook, Sanmina is positioned as a 1 (Strong Buy) stock with a Momentum Score of B, making it a compelling investment opportunity [11]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum characteristics, helping investors identify stocks likely to outperform the market in the short term [2][3] - Each stock is rated from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Score identifies attractive and discounted stocks using various financial ratios such as P/E and Price/Sales [3] Growth Score - The Growth Score focuses on a company's financial health and future outlook, analyzing projected and historical earnings and cash flow [4] Momentum Score - The Momentum Score capitalizes on price trends, using factors like recent price changes and earnings estimate revisions to identify high-momentum stocks [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for investors seeking the best value, growth, and momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to help build successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +23.93% since 1988, significantly outperforming the S&P 500 [7][8] - There are over 800 stocks rated 1 or 2, making it essential for investors to utilize Style Scores to narrow down their choices [8][9] Stock Highlight: Sanmina Corporation - Sanmina Corporation, based in San Jose, CA, is a global provider of electronics contract manufacturing services, serving various industries including medical and aerospace [11] - Sanmina has a Zacks Rank of 1 (Strong Buy) and a VGM Score of A, with a Momentum Style Score of B, reflecting a 39.2% increase in share price over the past four weeks [12] - Analysts have revised earnings estimates upwards for fiscal 2026, with the Zacks Consensus Estimate rising from $2.70 to $9.64 per share, and an average earnings surprise of +5.4% [12][13]

Core Viewpoint - AMD has completed the acquisition of AI inference startup MK1, which will enhance its capabilities in AI software and high-speed inference, contributing to its broader AI strategy [4][9]. Group 1: Acquisition Details - MK1, led by Paul Merolla, focuses on high-speed inference and AI technologies optimized for large-scale deployment, with a team comprising former engineers from Neuralink, Meta, Tesla, and Apple [4][9]. - The acquisition is part of AMD's strategy to strengthen its AI software ecosystem and improve its offerings in enterprise-level AI solutions [9]. Group 2: Financial Performance - AMD reported a record revenue of $9.25 billion for Q3, a 36% year-over-year increase, with a net profit of $1.2 billion, up 61% [11]. - The company forecasts Q4 revenue midpoint at $9.6 billion, exceeding market expectations [11]. Group 3: Strategic Moves - AMD has made several acquisitions this year, including Enosemi and Untether AI, investing a total of $36 million in these efforts [11]. - The company is also collaborating with OpenAI, with plans to deploy 1 GW of AMD Instinct MI450 GPUs by the second half of 2026 [11]. Group 4: Market Performance - AMD's stock price has doubled this year, reaching $243.98 per share, with a total market capitalization of $397.2 billion [12].

Core Insights - AMD has completed the acquisition of AI inference startup MK1, which will enhance its AI software capabilities and accelerate its enterprise-level AI initiatives [2][6] - MK1, led by Paul Merolla, focuses on high-speed inference technologies optimized for large-scale deployment, with a team comprising former engineers from Neuralink, Meta, Tesla, and Apple [2][6] - This acquisition is part of AMD's broader strategy to strengthen its position in the AI sector, following several other acquisitions aimed at enhancing its software capabilities [6][7] Company Developments - AMD's recent acquisitions include ZT Systems for $4.9 billion, Enosemi, and Untether AI, among others, indicating a strong push into the AI market [6][7] - The company reported a record revenue of $9.25 billion for Q3, a 36% year-over-year increase, and a net profit of $1.2 billion, up 61% [7] - AMD's stock price has doubled this year, reaching $243.98 per share, with a total market capitalization of $397.2 billion [7] Strategic Partnerships - AMD is collaborating with OpenAI, with plans to deploy 1 gigawatt of AMD Instinct MI450 GPUs by the second half of 2026, indicating a significant partnership in AI computing [7] - The company anticipates substantial growth in its AI business, projecting revenues to reach hundreds of billions by 2027 [7]

Core Insights - AMD has completed the acquisition of AI inference startup MK1, which will enhance its AI software stack and capabilities in high-speed inference and enterprise-level AI solutions [1][6] - MK1, led by Paul Merolla, focuses on high-speed inference technologies optimized for large-scale deployment, with a team comprising former engineers from Neuralink, Meta, Tesla, and Apple [1][6] - The acquisition is part of AMD's broader AI strategy, which includes multiple acquisitions aimed at strengthening its software capabilities [6][7] Company Developments - The MK1 team will integrate its software innovations with AMD's computing power, contributing to the development of a robust AI software ecosystem [1][2] - AMD's recent acquisitions include ZT Systems for $4.9 billion, Enosemi, and Untether AI, indicating a strong push into the AI sector [6][7] - AMD reported a record revenue of $9.25 billion for Q3, a 36% year-over-year increase, and a net profit of $1.2 billion, up 61% [7] Financial Performance - AMD's Q4 revenue guidance is projected at $9.6 billion, exceeding market expectations [7] - The company anticipates its AI business revenue to reach hundreds of billions by 2027 [7] - AMD's stock price has doubled this year, currently at $243.98 per share, with a market capitalization of $397.2 billion [7]