Ingram Micro Inc.
) has reported fourth-quarter 2012 earnings per share of 73 cents
that beat the Zacks Consensus Estimate of 59 cents. The results
were 4.3% higher than 70 cents reported in the year-earlier
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Ingram Micro's fourth quarter revenues of $11.4 billion increased
14.3% from $9.95 billion in the year-ago quarter and were above
the Zacks Consensus Estimate of $10.9 billion. The quarter's
result was affected by a 1.0% negative impact of currency
translation. Geographical contributions were decent barring
Europe. Apart from this, additional contributions from the
Brightpoint and Aptec Holdings acquisitions were the quarter's
Revenue contribution from North America increased 5.9% year over
year to $4.46 billion The improvement can be attributed to
double-digit growth in revenues from the small and medium
business (SMB) sector and the higher-margin Specialty business.
Europe, Middle East and Africa (EMEA) contributed $3.09 billion,
down 3.6% from the year-ago quarter. The decline was primarily
due to the difficult macro environment and competitive pressures.
However, management believes that the result was better than
The Asia-Pacific region generated $2.18 billion in sales, up
11.2% from $1.96 billion in the year-ago quarter. The improvement
was attributed to strong regional performances in India and China
and contribution from Aptec Holdings. Latin America sales grew
5.3% year over year to $602.7 million.
Gross profit increased 19.3% to $661.2 million in the reported
quarter from $554.3 million in the year-ago quarter. The
improvement was mainly attributable to solid performances in the
Specialty business and BrightPoint contribution.
Selling, general and administrative expenses increased 28.8% year
over year to $477.8 million. Operating margin of 1.5% dropped 30
basis points year over year.
Ingram Micro reported net income of $101.4 million, or 6 cents
per share, compared with $104.9 million or 68 cents in the
year-ago quarter. Excluding certain pre-tax one-time items,
adjusted net income was 73 cents per share compared with 70 cents
in the year-ago quarter.
Balance Sheet and Share Repurchase
Ingram Micro exited the fourth quarter with cash and cash
equivalents of $595.1 million, down from $5.56 billion in the
previous quarter. Accounts receivable increased 44.4%
sequentially to $3.78 billion. Inventories were $3.59 billion, up
from $3.34 billion in the prior quarter. Total debt balance was
$1.05 billion, up from $770.7 million in the previous quarter.
For the first quarter of 2013, the IT distributor expects
revenues to be down sequentially, due to seasonality. The company
expects gross margin to decrease sequentially due to lower
contribution from the Logistics business.
For fiscal 2013, the company expects revenues to grow in low
teens with support from BrightPoint.
The company seems very positive about BrightPoint. It expects the
same to drive annual cost synergies of at least $55.0 million for
2014 and accretion to non-GAAP earnings per share of at least 18
cents in 2013 and 35 cents in 2014.
Apart from this, the company sees returns from its strategic
investments in areas such as enterprise computing and Logistics
space. It will also focus on increasing profitability and share
in the Australian market.
We find Ingram Micro's fourth quarter results decent with both
the top and bottom lines beating the Zacks Consensus Estimates.
The company has provided a cautious first 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.
The ongoing integration of BrightPoint seems to be pretty quick
and the contribution is encouraging. Expected cost synergies and
sizable contributions going forward could make BrightPoint a key
driver for growth.
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. (MSFT).
However, the company's significant European exposure, high debt
burden and uncertainty in Logistics business force us to have a
bearish view on the stock.
Currently, Ingram Micro has a Zacks Rank #4 (Sell).