Ingram Micro Inc.
) has reported third-quarter 2012 earnings per share of 40 cents
that beat the Zacks Consensus Estimate by 2 cents. The results
were 21.2% higher than 33 cents reported in the year-earlier
Ingram Micro's third quarter revenue of $9.03 billion
increased 1.5% from $8.90 billion in the year-ago quarter and was
above the Zacks Consensus Estimate of $8.79 billion. The
quarter's result was affected by a 5.0% negative impact of
currency translation. Geographical contributions were solid
Revenue contribution from North America increased 5.4% year
over year to $3.97 billion on the back of solid growth in the
U.S. broad line business and double-digit growth in high margin
Specialty and Logistics divisions. But this was slightly offset
by a soft Canadian business. Europe, Middle East and Africa
(EMEA) contributed $2.42 billion, down 8.8% from the year-ago
quarter. The decline was primarily due to the difficult macro
environment and competitive pressures, which were partially
offset by favorable performances in Germany and the U.K.
The Asia-Pacific region generated $2.17 billion in sales, up
5.6% from $2.06 billion in the year-ago quarter. The slight
improvement was attributed to strong regional performances in
India and China. Latin America sales grew 11.1% year over year to
$467.1 million. Currency translation had an 8.0% negative
Gross profit increased 3.0% to $453.9 million in the reported
quarter from $440.7 million in the year-ago quarter. The
improvement was mainly attributable to solid performances in the
Specialty business and Logistics business in North America. But
this was offset by high volume sales of tablets and other
personal devices, which carry a low margin due to pricing
pressure. Hence, gross margin remained unchanged year over year
Selling, general and administrative expenses increased 0.5%
year over year to $356.0 million. Operating margin was flat year
over year at 1.0%.
Ingram Micro reported net income of $53.3 million, or 35 cents
per share, compared with $23.3 million or 15 cents in the
year-ago quarter. Excluding certain pre-tax one-time items,
adjusted net income was 40 cents per share, compared with 33
cents in the year-ago quarter.
Balance Sheet and Share Repurchase
Ingram Micro exited the third quarter with cash and cash
equivalents of $1.16 billion, up from $981.2 million in the
previous quarter. Accounts receivable increased 2.4% sequentially
to $3.78 billion. Inventories were $3.34 billion, up from $3.19
billion in the prior quarter. Total debt balance was $770.7
million, up from $463.9 million in the previous quarter.
For the fourth quarter of 2012, the IT distributor expects
revenue to be flat year over year. The company expects gross
margin to increase sequentially, although benefits arising from
higher hard disk drive pricing will be missing.
The company also expects BrightPoint to contribute around
$900.0 million toward revenue and to be breakeven to slightly
accretive to earnings per share in the fourth quarter. It also
expects to record roughly $9 million for amortization of
intangibles related to the BrightPoint acquisition.
We find Ingram Micro's third quarter results decent with both
the top and bottom lines beating the Zacks Consensus Estimates.
The company has provided a cautious fourth 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 encouraging.
We remain fairly optimistic about Ingram Micro's strategic
relationship with network giant
Juniper Networks Inc.
), as well as tech giants such as
However, the company's significant European exposure, debt
burden, concerns relating to Brightpoint's major customer loss
and its high debt burden forces us to have a bearish view on the
Currently, Ingram Micro has a Zacks #4 Rank, implying a
short-term "Sell" rating.
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