Arrow Electronics Inc.
) posted fourth-quarter 2012 adjusted earnings per share (EPS) of
$1.23, surpassing the Zacks Consensus Estimate by 13.9%. The
quarterly result came much above management's expectations but
was down from $1.38 per share in the year-ago quarter.
Arrow reported revenues of $5.40 billion, down 0.7% year over
year. Excluding the impact of acquisitions and foreign currency,
sales declined 3.0% year over year.
On a segmental basis, Global component sales were $3.19 billion,
down 7.5% year over year. Asia-Pacific posted a 7.0%
year-over-year increase, due to strong performances in China and
ASEAN regions. Revenues from America dropped 6.0% year over year
due to overall macro uncertainty. Sales from Europe were down
20.0% owing to Euro concerns.
Revenues from Global enterprise computing solutions (ECS) came in
at $2.22 billion, up 11.0% year over year. Arrow posted solid
double-digit year-over-year growth in services, storage and
software, which was partially offset by a decline in servers.
Americas posted solid performance as sales in the core
value-added distribution business was at par with expectations in
a seasonally slow quarter. Europe was also strong even amid the
weak market conditions.
Gross margin was down 60 basis points year over year to 13.1% due
to the ongoing pricing pressure and a change in mix of products.
Operating margin came in at 4.9%, up from 4.3% from the year-ago
quarter, as the company gained from a legal settlement.
Reported net income came in at $174.7 million or $1.62 per share
during the quarter compared to a net income of $174.1 million or
$1.53 per share in the year-ago quarter. Excluding the effect of
restructuring cost and legal settlement, adjusted net income was
$132.4 million or $1.23 per share compared with $157.3 million or
$1.38 per share in the year-ago quarter.
Balance Sheet and Cash Flows
Arrow ended the quarter with cash and cash equivalents of $409.7
million, up from $358.5 million at the end of the previous
quarter. As of Dec 31 2012, long-term debt was $1.59, up from
$1.56 billion at the end of the previous quarter.
During the quarter, the company generated $187.8 million in cash
from operating activities and incurred $36.7 million in capital
expenditure compared with $176.3 million and $26.7 million,
respectively, in the prior quarter.
Arrow repurchased shares worth $38.1 million in the fourth
Fiscal 2012 Update
Total revenues declined 5.0% year over year to $20.4 billion.
Reported EPS was $4.56, down from $5.17. Adjusted EPS was $4.40
versus $5.19 in the year-ago quarter.
Going forward, Arrow expects sales in the first quarter of 2013
to range between $4.60 billion and $5.50 billion. Global
components sales are projected between $3.05 billion and $3.25
billion. Global enterprise computing solutions sales are
estimated between $1.55 billion and $1.75 billion. Assuming an
average Euro to USD exchange rate of 1.35 to 1, earnings per
share (excluding any one-time charges) are projected around 80
cents to 92 cents for the first quarter of 2013.
Tax rate is expected between 28.0% and 29.0%, and share
outstanding is likely to be roughly 108.3 million.
The sequentially weak guidance reflects the ongoing macro
uncertainty and fiscal cliff in the U.S. and Euro issues. Arrow
also believes that business activity could be lower than normal
seasonality. However, the company mentioned that it will fight
back the challenges by initiating a productivity enhancement
program including an annual cost saving program of about $40.0
Electronic component distributor Arrow posted
better-than-expected fourth-quarter results with its EPS
surpassing the Zacks Consensus Estimate. Like the previous
quarter, revenues witnessed a year-over-year decline, but the
rate of decline moderated. First-quarter guidance was
disappointing reflecting macro concerns. However, the company's
positive commentary about enhanced productivity, annual cost
savings and successful ERP implementation across Europe is
encouraging. We believe that Arrow could get better contribution
from Europe as soon as the ERP program becomes operational.
We are also encouraged by Arrow's recent deal wins. In the past
two weeks, the company signed distribution agreements with
) American arm and
Currently, Arrow has a Zacks Rank #3 (Hold). Its archrival
), which posted decent second-quarter 2013 results, has a Zacks
Rank #1 (Strong Buy).
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