), a world-leading supplier of electronic components and computer
products, recently declared the acquisition of Pepperweed
Consulting. While we await further details on the agreement, this
latest acquisition is likely to stimulate Avnet's earnings stream
moving ahead, and it is also expected to bolster the company to
achieve its return on capital (ROC) target of 12.5% in two years'
Pepperweed Consulting, an HP Software Elite Partner, offers IT
enterprise management services and integration solutions to its
channel associates and clients, especially in government agencies.
It declared revenues of around $12 million in 2011.
With the acquisition, the company's Avnet Technology Solutions'
(TS) operating unit in the Americas will be conflated with
Pepperweed Consulting. Management expects that this acquisition
will seamlessly strengthen Avnet's software service portfolio in
the future. In addition, the company through its enhanced services
is likely to support its HP reseller partners for supplying
improved and modified IT solutions to its clients in government,
healthcare, energy, financial and retail markets.
Avnet has retained a keen eye for making profitable acquisitions
for its market expansion and technological upgradation. Hence, we
can be optimistic that such proactive advances in Avnet's TS
segment will help it successfully achieve its goal of obtaining
revenues of $2.55 billion - $2.85 billion in the upcoming fourth
quarter of fiscal 2012.
The company pertains to an industry, where ominous competition
is prevalent. Hence, Avnet should stay cautious of big players,
Arrow Electronics, Inc.
Richardson Electronics Ltd.
Wesco Intl Inc.
) in the industry.
The current Zacks Consensus Estimate for the fourth quarter of
fiscal 2012 is $1.08, reflecting a year-over-year growth of
(11.66%). Estimates for the fiscal year 2012 and 2013 are $4.16 and
$4.46, representing annual growth of (3.81%) and 7.33%,
respectively. We currently maintain a Neutral recommendation on
Avnet. The stock carries a Zacks #3 Rank, translating into a
short-term (1-3 months) Hold rating.
ARROW ELECTRONI (ARW): Free Stock Analysis
AVNET (AVT): Free Stock Analysis Report
RICHARDSON ELEC (RELL): Free Stock Analysis
WESCO INTL INC (WCC): Free Stock Analysis
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