Arrow Misses on Q3 Earnings & Revenues - Analyst Blog

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Arrow Electronics Inc. ( ARW ) reported third-quarter 2013 adjusted earnings per share of $1.18, which was short of the Zacks Consensus Estimate of $1.20. On a year-over-year basis earnings increased from $1.09 per share.

Quarter Details

Despite a modest year-over-year increase of 1.7%, adjusted revenues of $5.048 billion lagged the Zacks Consensus Estimate of $5.131 billion. However, including the contribution from acquisitions of $5.5 million, revenues came in at $5.053 billion, marginally down from the year-ago quarter.

Revenues from Global components increased 2.8% on a year-over-year basis to $3.47 billion. Adjusted revenues increased 0.7% from the year-ago quarter. Revenues from America increased 2% while Asia-Pacific revenues remained flat. Adjusted European revenues increased 3.9% on a year-over-year basis.

Revenues from Global enterprise computing solutions (ECS) came in at $1.58 billion, down 0.6% year over year. Revenues from America grew 3%, but failed to offset the 13.5% decrease in revenues from Europe.

Arrow reported adjusted operating margins of 3.9% which was up 8 basis points (bps) from the year-ago quarter primarily due to lower operating expenses as a percentage of revenues. Adjusted operating expenses increased marginally (up 0.4%) from the year-ago quarter to $477 million but were down 12 bps as a percentage of revenues for the same period of time.

Arrow's adjusted net income (excluding the effect of restructuring and amortization) came in at $119.9 million or $1.18 per share compared with $119.3 million or $1.09 per share in the year-ago quarter.

Arrow ended the quarter with cash and cash equivalents of $251.8 million, down from $345.9 million at the end of the previous quarter. Long-term debt was $1.91 billion, down from $2.10 billion at the end of the previous quarter. During the quarter, the company generated $81 million in cash from operations.


For the fourth quarter of 2013, Arrow expects sales to range between $5.6 billion and $6 billion, reflecting sequential increase in revenues. Global components sales are projected between $3.2 billion and $3.4 billion. Global enterprise computing solutions sales are estimated between $2.4 billion and $2.6 billion. The company expects non-GAAP earnings to range between $1.56 and $1.68. The Zacks Consensus Estimate stands at $1.62 per share.

Our Take

Electronic component distributor Arrow posted lower-than-expected third-quarter results. However, year-over-year comparisons were modestly up and the company's positive commentary about enhanced productivity, annual cost savings and expected contributions from Europe are encouraging. Moreover, the company provided encouraging guidance.

However, uncertain economic conditions and competition from Avnet ( AVT ) and Ingram Micro ( IM ) are the concerns, going forward.

Currently, Arrow has a Zacks Rank #2 (Buy). Apart from Arrow, investors can also consider SanDisk Corp. ( SNDK ) which has a Zacks Rank #1 (Strong Buy) and is worth buying.

ARROW ELECTRONI (ARW): Free Stock Analysis Report

AVNET (AVT): Free Stock Analysis Report

INGRAM MICRO (IM): Free Stock Analysis Report

SANDISK CORP (SNDK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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