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Avnet (AVT) Q2 Earnings & Revenues Top, FY18 Guidance Up
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Avnet Inc. (AVT - Free Report) reported second-quarter fiscal 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. The company reported fiscal second-quarter adjusted earnings of 78 cents per share, beating the Zacks Consensus Estimate of 72 cents and also marked improvement from the year-ago quarter by a penny.
The adjusted figure excludes restructuring, integration and other charges, and amortization of intangible assets. Earnings also came toward the high-end of the company’s previous guidance range of 67-77 cents per share.
Before delving into the financial results, it should be noted that Avnet changed its reportable segments during fourth-quarter fiscal 2017, which comprised the Electronic Components and Premier Farnell operating groups.
The change in reportable segment was done to reflect the company’s actual business post completion of the divesture of the Technology Solutions business to Tech Data Corporation , as well as the closure of the much-awaited acquisition of Premier Farnell plc in the first quarter of fiscal 2017 as well.
Notably, Avnet’s shares have outperformed the industry in the year-to-date period. While the stock returned 8.5%, the industry gained 4.8%.
Quarter Details
Avnet’s quarterly revenues of $4.522 billion not only increased 5.8% year over year but also surpassed the Zacks Consensus Estimate of $4.434 billion. Moreover, revenues remained toward the higher end of management’s guidance of $4.25-$4.55 billion (mid-point $4.4 billion).
On a constant-currency basis, revenues were up 3.1% year over year, while organic revenues inched up 1.9% from the year-ago quarter. The company’s quarterly revenues mainly benefited from the recently-acquired Premier Farnell business and robust performance of the Electronic Components segment.
Avnet’s Electronics Components segment’s revenues increased 4% year over year to $4.164 billion. The company noted that its ongoing “supplier program changes” have partially affected the segment’s overall performance.
The company reported a year-over-year increase of 2.8% in gross profit, reaching $602 million. However, gross profit margin contracted 40 basis points (bps) to 13.3% primarily due to supplier channel and program changes.
Adjusted operating income dropped 11.7% from the year-earlier quarter to $145.7 million, as benefit from the Premier Farnell acquisition, and sound growth across the EMEA and Asia regions were more than offset by a decline in the Americas revenues. Adjusted operating margin came in at 3.2%, contracting 63 bps from the year-ago quarter, chiefly due to the supplier channel and program changes.
Adjusted net income amounted to $94.5 million compared with $100.8 million reported in the year-ago quarter.
Avnet exited the fiscal second quarter with cash and cash equivalents and marketable securities of $726 million compared with $737.6 million recorded in the previous quarter. Long-term debt was $1.488 billion. During the first half of fiscal 2018, the company used $59.22 million of cash for operational activities.
Avnet paid dividend worth $43.6 million during the first two quarters. The company repurchased 3.6 million shares worth $135.5 million during the first half and has approximately $460 million remaining under the current share-repurchase authorization program.
Guidance
Buoyed by better-than-expected fiscal second-quarter performance, the company raised its outlook for fiscal 2018. Avnet now expects sales to be approximately $18.9 billion, up from the previous range of $18.1-$18.5 billion (mid-point $18.3 billion). Currently, the Zacks Consensus Estimate is pegged at $18.3 billion.
Adjusted earnings per share are now projected between $3.35 and $3.55 (mid-point $3.45), up and narrower from the prior range of $3.10-$3.60 per share (mid-point $3.35). The Zacks Consensus Estimate is pegged at $3.36.
For the fiscal third quarter, the company estimates sales in the range of $4.65-$4.95 billion (mid-point $4.8 billion). Currently, the Zacks Consensus Estimate is pegged at $4.53 billion.
Adjusted earnings per share are estimated in the range of 90 cents to $1 (mid-point 95 cents). The Zacks Consensus Estimate is pegged at 87 cents.
Our Take
Avnet posted impressive fiscal second-quarter results and issued an optimistic guidance for the fiscal third quarter as well as raised the outlook for fiscal 2018.
The company has been taking major restructuring steps to streamline its business for the last one year. In doing so, Avnet divested its Technology Solution business and currently deals in Electronics Marketing.
Notably, the divestment of its troubled Technology Solution business has allowed Avnet to focus on high growth areas such as marketing electronic components and related products in the supply chain. We believe its efforts are paying off as reflected in the last few quarterly results. Benefits from these initiatives are expected to continue and positively impact the company’s results over the long run.
Furthermore, the company has been aggressively expanding in the Internet of Things (IoT) space through acquisitions and partnerships, which will likely be conducive to its upcoming quarterly results. Over the past year, the company has entered into several partnerships, including one with AT&T (T - Free Report) , and carried out acquisitions such as that of Dragon Innovation, Premier Farnell and Hackster.io.
Nonetheless, we are slightly skeptical about its bottom-line performance due to the near-term challenges it faces. The company’s last two quarterly results were marred by changes in supplier channel and program. We believe this might continue to be a drag on the forthcoming quarter results as well.
Micron has an expected long-term EPS growth rate of 10%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Avnet (AVT) Q2 Earnings & Revenues Top, FY18 Guidance Up
Avnet Inc. (AVT - Free Report) reported second-quarter fiscal 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. The company reported fiscal second-quarter adjusted earnings of 78 cents per share, beating the Zacks Consensus Estimate of 72 cents and also marked improvement from the year-ago quarter by a penny.
The adjusted figure excludes restructuring, integration and other charges, and amortization of intangible assets. Earnings also came toward the high-end of the company’s previous guidance range of 67-77 cents per share.
Before delving into the financial results, it should be noted that Avnet changed its reportable segments during fourth-quarter fiscal 2017, which comprised the Electronic Components and Premier Farnell operating groups.
The change in reportable segment was done to reflect the company’s actual business post completion of the divesture of the Technology Solutions business to Tech Data Corporation , as well as the closure of the much-awaited acquisition of Premier Farnell plc in the first quarter of fiscal 2017 as well.
Notably, Avnet’s shares have outperformed the industry in the year-to-date period. While the stock returned 8.5%, the industry gained 4.8%.
Quarter Details
Avnet’s quarterly revenues of $4.522 billion not only increased 5.8% year over year but also surpassed the Zacks Consensus Estimate of $4.434 billion. Moreover, revenues remained toward the higher end of management’s guidance of $4.25-$4.55 billion (mid-point $4.4 billion).
On a constant-currency basis, revenues were up 3.1% year over year, while organic revenues inched up 1.9% from the year-ago quarter. The company’s quarterly revenues mainly benefited from the recently-acquired Premier Farnell business and robust performance of the Electronic Components segment.
Avnet’s Electronics Components segment’s revenues increased 4% year over year to $4.164 billion. The company noted that its ongoing “supplier program changes” have partially affected the segment’s overall performance.
The company reported a year-over-year increase of 2.8% in gross profit, reaching $602 million. However, gross profit margin contracted 40 basis points (bps) to 13.3% primarily due to supplier channel and program changes.
Adjusted operating income dropped 11.7% from the year-earlier quarter to $145.7 million, as benefit from the Premier Farnell acquisition, and sound growth across the EMEA and Asia regions were more than offset by a decline in the Americas revenues. Adjusted operating margin came in at 3.2%, contracting 63 bps from the year-ago quarter, chiefly due to the supplier channel and program changes.
Adjusted net income amounted to $94.5 million compared with $100.8 million reported in the year-ago quarter.
Avnet, Inc. Price, Consensus and EPS Surprise
Avnet, Inc. Price, Consensus and EPS Surprise | Avnet, Inc. Quote
Avnet exited the fiscal second quarter with cash and cash equivalents and marketable securities of $726 million compared with $737.6 million recorded in the previous quarter. Long-term debt was $1.488 billion. During the first half of fiscal 2018, the company used $59.22 million of cash for operational activities.
Avnet paid dividend worth $43.6 million during the first two quarters. The company repurchased 3.6 million shares worth $135.5 million during the first half and has approximately $460 million remaining under the current share-repurchase authorization program.
Guidance
Buoyed by better-than-expected fiscal second-quarter performance, the company raised its outlook for fiscal 2018. Avnet now expects sales to be approximately $18.9 billion, up from the previous range of $18.1-$18.5 billion (mid-point $18.3 billion). Currently, the Zacks Consensus Estimate is pegged at $18.3 billion.
Adjusted earnings per share are now projected between $3.35 and $3.55 (mid-point $3.45), up and narrower from the prior range of $3.10-$3.60 per share (mid-point $3.35). The Zacks Consensus Estimate is pegged at $3.36.
For the fiscal third quarter, the company estimates sales in the range of $4.65-$4.95 billion (mid-point $4.8 billion). Currently, the Zacks Consensus Estimate is pegged at $4.53 billion.
Adjusted earnings per share are estimated in the range of 90 cents to $1 (mid-point 95 cents). The Zacks Consensus Estimate is pegged at 87 cents.
Our Take
Avnet posted impressive fiscal second-quarter results and issued an optimistic guidance for the fiscal third quarter as well as raised the outlook for fiscal 2018.
The company has been taking major restructuring steps to streamline its business for the last one year. In doing so, Avnet divested its Technology Solution business and currently deals in Electronics Marketing.
Notably, the divestment of its troubled Technology Solution business has allowed Avnet to focus on high growth areas such as marketing electronic components and related products in the supply chain. We believe its efforts are paying off as reflected in the last few quarterly results. Benefits from these initiatives are expected to continue and positively impact the company’s results over the long run.
Furthermore, the company has been aggressively expanding in the Internet of Things (IoT) space through acquisitions and partnerships, which will likely be conducive to its upcoming quarterly results. Over the past year, the company has entered into several partnerships, including one with AT&T (T - Free Report) , and carried out acquisitions such as that of Dragon Innovation, Premier Farnell and Hackster.io.
Nonetheless, we are slightly skeptical about its bottom-line performance due to the near-term challenges it faces. The company’s last two quarterly results were marred by changes in supplier channel and program. We believe this might continue to be a drag on the forthcoming quarter results as well.
Currently, Avnet carries a Zacks Rank #3 (Hold).
A better-ranked stock in the broader technology sector is Micron (MU - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron has an expected long-term EPS growth rate of 10%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>