Ingram Micro Inc.
) reported second-quarter 2013 earnings per share of 55 cents,
beating the Zacks Consensus Estimate of 46 cents. The results
were 27.9% higher than 43 cents reported in the year-earlier
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Ingram Micro's second quarter revenues of $10.3 billion increased
17.4% from $8.8 billion in the year-ago quarter but were
marginally below the Zacks Consensus Estimate of $10.4 billion.
The effect of currency translation was nominal. Geographical
contributions were decent barring Europe. Apart from this,
additional contributions from the Brightpoint and Aptec Holdings
acquisitions were the quarter's differentiators.
Revenue contribution from North America increased 5.3% year over
year to $4.04 billion. The improvement can be attributed to
strong performances in all the U.S. divisions (especially in
small and medium business (SMB) market, storage, networking and
security markets and specialty divisions) and strength in the
Canadian business. Europe, Middle East and Africa (EMEA)
contributed $2.43 billion, down 1.2% from the year-ago quarter.
Difficult macro environment and competitive pressures continued
to count on European revenue contributions. Strength in U.K.,
France and the Netherlands was more than offset by weakness in
Germany, Belgium and Spain.
The Asia-Pacific region generated $2.13 billion in sales, up 4.5%
from $2.04 billion in the year-ago quarter. The improvement was
attributed to strong regional performances in India and Australia
as well as strong contribution from Aptec Holdings. The results
were somewhat offset by weakness in China. Latin America sales
grew 3.9% year over year to $459.8 million, with support from
sales growth in Brazil.
Brightpoint contributed $1.25 billion, a significant surge from
$1.04 billion in the prior quarter.
Gross profit increased 31.6% from the year-ago quarter to $595.8
million. Gross margin was 5.8%, up from 5.2% in the year-ago
quarter. The improvement was mainly attributable to solid
performances in the mobility business, which was inherited from
Brightpoint. This was partially offset by an adverse effect of a
higher mix of lower margin products (such as tablets).
Selling, general and administrative expenses increased 32.4% year
over year to $465.3 million. Operating margin of 1.1% was flat
compared to the year-ago period.
Ingram Micro reported net income of $69.7 million or 45 cents per
share compared with $61.3 million or 40 cents in the year-ago
quarter. Excluding certain pre-tax one-time items, adjusted
earnings were 55 cents per share compared with 43 cents in the
Ingram Micro exited the second quarter with cash and cash
equivalents of $726.9 million, up from $562.6 million in the
previous quarter. Accounts receivable decreased 2.7% sequentially
to $4.39 billion. Inventories were $3.70 billion, down from $3.81
billion in the prior quarter. Total debt balance was $884.6
million, down from $1.20 billion in the previous quarter.
For the third quarter of 2013, Ingram expects revenues to be flat
to slightly up sequentially, following the seasonal trend. The
company expects gross margin to be flat sequentially. The company
also expects third quarter adjusted earnings per share to benefit
from a damage charge received from the LCD flat panel display
We find Ingram Micro's second quarter results mixed with the
bottom line surpassing the Zacks Consensus Estimate and the top
line missing the same. The company has provided a cautious third
quarter outlook. But we believe that the improving IT spending
trend will help Ingram to post better results ahead. Moreover,
management's commentary of focusing more on the high-margin
market and on strategic acquisitions to grow market share is
The ongoing integration of BrightPoint seems to be pretty quick
and the contribution is encouraging. Expected cost synergies and
sizable contributions could make BrightPoint a key driver for
Though the company's significant European exposure and a high
debt burden are concerns, we remain fairly optimistic about
Ingram Micro's strategic relationship with network giant
Juniper Networks Inc.
), as well as tech giants such as
) and Microsoft Corp.
Currently, Ingram Micro has a Zacks Rank #2 (Buy).