) reported adjusted earnings (excluding restructuring,
integration and other charges, gain on bargain purchase and
other, amortization of intangibles, and tax gains) of $1.17 per
share in the second quarter of fiscal 2014, beating the Zacks
Consensus Estimate of $1.11 per share. Earnings not only beat
management's guidance range of $1.05 to $1.15 but were also up
11.3% on a year-over-year basis.
Revenues came in at $7.42 billion, up 10.8% from the year-ago
quarter. Revenues in the quarter surpassed management's guidance
range of $6.65 billion to $7.25 billion and beat the Zacks
Consensus Estimate of $6.95 billion. The year-over-year increase
was primarily due to strength in the Asia region. Moreover, the
company recorded strong organic growth across its business
On a segmental basis, revenues from Electronics Marketing (EM)
grew 13.1% from the year-ago quarter to $4.15 billion and came
ahead of management's guided range of $3.80 billion-$4.10
billion. The year-over-year increase was primarily boosted by
high-volume fulfillment business in the Asia region. Organic
growth was 11.4% year over year.
Revenues from Technology Solutions (TS) grew 7.9% from the
year-ago quarter to $3.27 billion. Segmental revenues also came
ahead of management's guidance range of $2.85 billion-$3.15
billion. The year-over-year growth was mainly due to continued
strong demand in America and Asia. Organic growth was 4.1% year
Gross profit for the quarter increased 10.4% year over year to
$848.6 million, while gross margin in the quarter was 11.4%, down
4 basis points (bps) on a year-over-year basis. The margin
contraction was due to unfavorable business mix.
Adjusted operating income increased 15.2% from the year-ago
quarter to $263.2 million, while operating margin came in at 3.5%
compared to 3.4% in the year-ago quarter. The increase was
primarily due to increase in EM.
Adjusted net income was $163.9 million or $1.17 per share
compared with $145.6 million or $1.05 in the year-ago quarter.
Adjusted net income excluded restructuring, integration and other
charges, gain on bargain purchase and other, amortization of
intangibles, and tax gains.
Balance Sheet and Cash Flow
Avnet ended the quarter with cash and cash equivalents of
$779.3 million compared with $865.6 million in the previous
quarter. Long-term debt was $1.23 billion compared with $1.20
billion in the previous quarter.
The company used $28 million cash in operating activities.
Avnet paid a dividend of $20.6 million (15 cents per share) in
For third-quarter fiscal 2014, the company projects
consolidated sales in the range of $6.6 billion to $7.2 billion,
while the Zacks Consensus Estimate is pegged at $6.63 billion.
Avnet projects EM and TS sales in the range of $4.0 billion-$4.3
billion and $2.6 billion-$2.9 billion, respectively.
Adjusted earnings per share (excludes restructuring and
integration charges related to costs reductions and acquisitions
and amortization of intangibles) is likely to be within $1.02 and
$1.12 per share while tax rate is likely to be in a range of
27%-31%. The Zacks Consensus Estimate is pegged at $1.05.
Avnet posted better-than-expected second-quarter results.
However, the guidance was less-than-encouraging due to
seasonality in the western regions and below-normal seasonality
in the Asia region due to a possible slump in the high volume
Avnet's leading position in electronics distribution,
continuous cost cutting initiatives and acquisition synergies are
encouraging. It does, however, face stiff competition for both
its domestic and foreign operations, especially from archrival
Arrow Electronics Inc.
). However, we look forward to management's decision to optimize
costs and investments to tap the changing demand.
Currently, Avnet has a Zacks Rank #3 (Hold). Investors can
also consider other technology stocks such as
Western Digital Corporation
). Both the stocks sport a Zacks Rank #2 (Buy).
ARROW ELECTRONI (ARW): Free Stock Analysis
AVNET (AVT): Free Stock Analysis Report
SEAGATE TECH (STX): Free Stock Analysis
WESTERN DIGITAL (WDC): Free Stock Analysis
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