Earlier this week,
) completed yet another acquisition being that of Altron GmbH &
Co. KG (Altron). This was done with the clear intent of
proliferating Avnet's Abacus unit across Europe's IP&E market.
Altron's acquisition shall not only be immediately accretive to
Avnet's earnings but will also help it achieve its return on
capital (ROC) target of 12.5%.
AVNET (AVT): Free Stock Analysis Report
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Avnet appears to be on an acquisition spree as the Altron
acquisition marks the second one this week post the acquisition of
Magirus Group (Magirus). Both these German-based companies acquired
by Avnet are going to be major growth drivers for the company's
yields across its European businesses.
Altron is a German-based company which is an interconnect, passive
and electrochemical components distributor with above 40 suppliers.
Avnet shall be able to make a stronger foothold in the German
economy, thereby expanding its market share substantially in the
EMEA region through this venture.
It is to be noted that the EMEA region has been a major point of
concern for the company of late. This disconcerting feature became
only too palpable in the third quarter results of fiscal 2012 which
were declared on April 26, 2012. Sales across this area during the
first nine months of fiscal 2012 dropped around 8.1% to reach $5.69
billion compared to the same period last year.
This deteriorating demand in the European economy was the main
reason for the 4.3% annual downfall reported in the company's
Electronics Marketing (EM) segment in its third fiscal quarter. We
can expect these downsides to hopefully mitigate through such
proactive advances made to ameliorate gains incipiently.
Avnet should, nevertheless, be wary of its competitors in the
industry. Big players to keep an eye out for in this regard include
Anixter International Inc.
WESCO International Inc.
Richardson Electronics Ltd.
The company currently retains a Zacks #4 Rank, which translates
into a short-term 'Sell' rating. We also maintain a long-term
'Neutral' recommendation on the stock.