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Avnet, Inc. (AVT): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By: Zacks.com
Posted: 1/27/2014 7:00:00 AM
Referenced Stocks: AVT;TS

Summary:
Avnet posted better-than-expected fourth-quarter results. The guidance, however, was less than encouraging due to tepid IT spending environment. Avnet's leading position in electronics distribution, continuous cost cutting initiatives and acquisition synergies are encouraging. A significant portion of the company's revenues comes from the sale of semiconductors, which is a cyclical industry characterized by changes in technology and manufacturing capacity and is subject to significant market upturns and downturns. Moreover, the company faces stiff competition in both domestic and foreign operations, especially from archrival Arrow Electronics. Thus, we reiterate our Neutral recommendation on Avnet.

Overview:

Based in Phoenix, AZ, Avnet Inc., (AVT) is one of the world's largest distributors of electronic components and computer products. The company's customer base includes original equipment manufacturers (OEMs), electronic manufacturing services (EMS) providers, original design manufacturers (ODMs), and value-added resellers (VARs). Avnet maintains an extensive inventory, including electronic products from over 300 component and system manufacturers, which it distributes to customers worldwide. The company distributes products for companies like International Business Machines Corp. and Hewlett-Packard Co.

The product set consists of semiconductors (approximately 47.9% of fiscal 2014 revenues), computer products (38.4%), passives, and electromechanical & other (10.8%) and connectors (2.9%). Avnet operates in two segments Electronics Marketing (EM) and Technology Solutions (TS).

The EM segment distributes semiconductors and Interconnect, passive and electromechanical devices (IP&E), and provides supply chain management, inventory replenishment system and non-complex engineering design services. In fiscal 2014, the EM segment generated 60.1% of total sales (59% of 2013). The TS Group distributes mid- and high-end servers, data-storage gear, networking equipment and software services. Additionally, in fiscal 2014, the TS segment generated about 39.9% of total sales (41% in 2013).

On a geographical basis, Avnet generated approximately 40% of its revenues from operations in the Americas in fiscal 2014 while Europe, the Middle East and Africa (EMEA) contributed about 30%. The Asia/Pacific region accounted for 30% of revenues.

Avnet's major competitors include Arrow Electronics Inc., Ingram Micro Inc., Future Electronics and World Peace Group.


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