Arrow Electronics Inc.
) reported second-quarter 2014 adjusted earnings (excluding the
effect of restructuring and amortization) per share of $1.43, which
beat the Zacks Consensus Estimate by a penny. On a year-over-year
basis, earnings increased 20.4%, primarily due to growth across its
Arrow Electronics, Inc - Earnings Surprise |
However, shares of Arrow went down 3.3% on Jul 29, primarily due
to modest third quarter guidance.
Arrow's revenues on a reported basis came in at $5.68 billion,
which increased 6.9% from the year-ago quarter. On an adjusted
basis, revenues increased by a marginal 0.8% from the year-ago
quarter and also came in at $5.68 billion, beating the Zacks
Consensus Estimate of $5.65 billion. The company's book-to-bill
ratio was 1.04.
On a segmental basis, revenues from Global components increased 5 %
on a year-over-year basis to $3.57 billion. Adjusted revenues
increased 2.1% from the year-ago quarter and also came in at $3.57
billion. Revenues from America increased 2% while Asia-Pacific
revenues increased 5%. Adjusted European revenues increased 4% on a
year-over-year basis (particularly in Southern Europe), which
boosted segment revenues.
Revenues from Global enterprise computing solutions (ECS) came in
at $2.11 billion, up 10.5% on a year-over-year basis, primarily due
to increased demand for software and security related solutions and
hardware business. Adjusted revenues decreased 1.4% from the
year-ago-quarter. Revenues from America increased 1%. Revenues from
Europe grew 26.0%, primarily due to the Computerlinks acquisition.
Gross margin in the quarter came in at 13.2% compared to 13.0% in
the year-ago quarter, primarily due to growth in the European
components business and favorable mix of ECS business.
Arrow reported adjusted operating margin of 4%, which was up 36
basis points (bps) from the year-ago quarter primarily due to
growth across its businesses. Adjusted operating expenses
increased 4.5% from the year-ago quarter to $518.8 million. As a
percentage of revenues operating expenses were down 18 bps, which
also positively impacted margin.
Arrow's adjusted net income (excluding the effect of restructuring
and amortization) came in at $144.3 million compared with $123.9
million in the year-ago quarter.
Arrow exited the quarter with cash and cash equivalents of $308.9
million, up from $258.3 million at the end of the previous quarter.
Long-term debt was $2.10 billion, down from $2.14 billion at the
end of the previous quarter. During the quarter, the company
generated $159.4 million in cash from operations. During the
quarter, Arrow repurchased shares worth $50.0 million.
For the third quarter of 2014, Arrow expects sales to range between
$5.25 billion and $5.65 billion (mid pint $5.45 billion),
reflecting a sequential decrease in revenues. The Zacks Consensus
Estimate is pegged at $5.41 billion.
Global components sales are projected between $3.55 billion and
$3.75 billion. Global enterprise computing solutions sales are
estimated between $1.7 billion and $1.9 billion. The company
expects non-GAAP earnings to range between $1.26 and $1.38 per
share (mid-point $1.32 per share), down sequentially. The Zacks
Consensus Estimate of $1.31 per share is less than the mid-point of
the guided range.
Management expects its global components and enterprise computing
solutions remain at par on a sequential basis in the third quarter.
Electronic component distributor Arrow posted better-than-expected
second-quarter results. Year-over-year comparisons were also up and
Arrow had a favorable book to bill ratio. Moreover, positive
commentary about enhanced productivity and continued higher
contributions from Europe are encouraging. However, the company
provided modest third quarter guidance.
Moreover, incremental sales from strategic acquisitions such as
that of Computerlinks are expected to boost Arrow's top line going
forward. We believe that Arrow's core strength of providing
best-in-class services and easy-to-acquire technologies are
expected to bolster its growth in the future.
However, uncertain economic conditions, high debt burden and
competition from Avnet (
) and Ingram Micro (
) are concerns, going forward.
Currently, Arrow has a Zacks Rank #2 (Buy). Investors can also
consider NVIDIA Corporation (
) which has a Zacks Rank #1 (Strong Buy) and is worth buying.
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