Synnex Beats on Earnings, Shares Soar - Analyst Blog
Shares of SYNNEX Corp. ( SNX ) surged a robust 23.3% on Apr 4, 2014, following the company's first-quarter earnings release on Apr 3, 2014, after the market closed. For the first quarter of 2014, Synnex Corporation reported strong financial results with quarterly earnings of $1.25 a share which comfortably surpassed the Zacks Consensus Estimate of 94 cents a share by a strong 33%.
First-quarter earnings were also up a significant 37.4% compared with the prior-year quarter. Profits during the quarter were primarily driven by strong growth across the company's business segments, especially its IT business which performed above expectations.
For the first quarter of 2014, Synnex Corporation reported revenues of $3.03 billion, surging 23% year over year compared with $2.46 billion. Top line was primarily driven by strong performance of the company's Technology Solutions segment and the accretive acquisition of IBM CRM.
In first-quarter 2014, Synnex renamed its business segments better reflect the company's business model.
Technology Solutions (earlier Distribution segment): For the first quarter, revenues for the Technology Solutions segment surged 20% year over year to $2.90 billion from $2.48 billion in the prior-year quarter. After adjusting the negative impact of currency translation of about $93 million, the Technology Solutions business grew 23.8%.
The segment reported strong business in the U.S. and Japan, while Canada also managed to contribute to the top-line improvement due to organic growth and the acquisition of Supercom. The segement's commercial and consumer markets also witnessed increased sales.
Concentrix (earlier GBS segment): Revenues for the first quarter for Concentrix were $127 million, up a massive 186.2% year over from $44.3 million in the prior-year quarter. Revenues in the segment were primarily driven by the acquisition of the IBM customer care business which was immediately accretive to the segment's revenues after the deal closed on Jan 31, 2014 and the 18% growth in the segment's legacy business.
For the first quarter, gross margin was up 484 basis points (bps) to 6.83% compared with 6.34% in the comparable prior-year quarter. The increase was mainly attributable to the positive impact of the IBM ( IBM ) CRM acquisition. However, the operating margin for the quarter was down 226 bps to 20.5% versus 22.7% primarily due to higher selling and general expenses.
Cash and Balance Sheet
Exiting the quarter, the company had cash and cash equivalents of $148.4 million compared with $151.6 million as on Nov 30, 2013. The company had a long-term debt of $77 million as on Feb 28, 2014 versus $56.4 million as on Nov 30, 2013. The company had shareholders' equity of $1.53 billion as on Feb 28, 2014 compared with shareholders' equity of $1.41 billion as on Nov 30, 2013.
Following the first-quarter results, the company provided guidance for the second quarter of 2014. Revenues for the second quarter are expected in the range of $3.1 billion to $3.2 billion while non-GAAP earnings are expected to be in the range of $1.34 to $1.38 a share. The Zacks Consensus Estimate for the second quarter is $1.37 a share. The guidance does not include acquisition and integration expenses and amortization of intangibles.
Synnex Corporation is upbeat about its performance for the year ahead, with revenue growth across its business and accretive strategic acquisitions. The acquisition of IBM CRM has placed Synnex at the top 10 th position as the provider of effective value-added services. Further, in order to better reflect the company's business model, Synnex has renamed its segments.
Synnex Corp. is a leading provider of business process services, servicing resellers and original equipment manufacturers across the world. The company's primary business process services include wholesale distribution, contract assembly, and business process outsourcing.
Synnex currently has a Zacks Rank #3 (Hold). Investors interested in the business software services sector can consider better-ranked companies such as Guidewire Software, Inc. ( GWRE ) having a Zacks Rank #1 (Strong Buy), Acceleys Inc . ( ACCL ) and CDW Corp. ( CDW ) both having a Zacks Rank #2 (Buy).
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