Updated Research Report on Arrow Electronics - Analyst Blog
March 31 2014 - 2:00PM
Zacks
On Mar 28, 2014, we issued an updated research report on
Arrow Electronics Inc. (ARW) after it reported
better-than-expected fourth-quarter results.
Arrow’s year-over-year comparisons were modestly up and it had a
favorable book-to-bill ratio. In addition, positive commentary
about enhanced productivity, annual cost savings and continued
higher contributions from Europe were encouraging.
Arrow’s strong distribution channels are being preferred by
original equipment manufacturers, contract manufacturers and
commercial customers to market their products. The company’s core
strength in providing best-in-class services and easy-to-acquire
technologies will act as growth catalysts.
Moreover, the company has secured a significant market share
through a broad portfolio of products and services, and continued
efforts to maximize consumer satisfaction. Additionally,
incremental sales from the strategic acquisitions, such as
Computerlinks, are expected to boost Arrow’s top line.
It is worth noting that, spending on electronic equipments are
dependent on the overall IT spending. Per the U.S. research firm
Gartner, overall IT spending is expected to grow 3.1% in 2014,
primarily driven by enterprise software and IT services. As a
specialized distributor of these products and services, Arrow
Electronics stands to benefit from the projected increase.
However, Arrow derives a significant portion of its revenues
from the sale of semiconductors — a cyclical industry characterized
by changes in technology and manufacturing capacity and is subject
to significant market upturns and downturns. According to World
Semiconductor Trade Statistics (WSTS) data, worldwide semiconductor
sales are expected to grow at 4.1% in 2014, followed by 3.4% growth
in 2015. Therefore, a slowdown in this market might decelerate the
company’s business in 2015.
Moreover, Arrow has a highly leveraged balance sheet. As of Dec
31, 2013, the company’s net debt amounted to $1.86 billion, which
deteriorated from a net debt position of $1.69 billion as on Sep
28, 2013. Additionally, competition from Avnet
(AVT) and Ingram Micro (IM) remain the
headwind.
Currently, Arrow Electronics has a Zacks Rank #3 (Hold).
Investors may consider a better-ranked stock like Juniper
Networks (JNPR) sporting a Zacks Rank #1 (Strong Buy).
ARROW ELECTRONI (ARW): Free Stock Analysis Report
AVNET (AVT): Free Stock Analysis Report
INGRAM MICRO (IM): Free Stock Analysis Report
JUNIPER NETWRKS (JNPR): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Arrow Electronics (NYSE:ARW)
Historical Stock Chart
From Apr 2024 to May 2024
Arrow Electronics (NYSE:ARW)
Historical Stock Chart
From May 2023 to May 2024