Ingram Earnings In Line with Est - Analyst Blog
October 31 2011 - 12:07PM
Zacks
Ingram Micro Inc. (IM) has reported
third-quarter 2011 earnings per share of 35 cents, just matching
the Zacks Consensus Estimate.
Revenues
Ingram Micro’s third quarter revenue of $8.90 billion increased
5.3% from $8.45 billion in the year-ago quarter. The improvement
may be attributed to modest sales growth across all geographic
regions and improved Information Technology (IT) spending. Foreign
currency translation had a 4% positive impact on revenue.
Revenue contribution from North America increased 3.3% year over
year to $3.77 billion. Europe, Middle East and Africa (EMEA)
contributed $2.65 billion, up 7.0% from the year-ago quarter.
European currency translation had a positive impact of 9.0% on
regional revenue.
The Asia-Pacific region generated $2.06 billion in sales, up
5.4% from $1.95 billion in the third quarter of 2010. Foreign
currency translation had a 6% positive impact on revenue. Latin
America sales grew 13.1% year over year to $420.3 million,
benefiting from a positive translation impact of 3% from relatively
stronger regional currencies.
Operating Results
Gross profit dropped 2.8% to $440.7 million in the reported
quarter from $453.5 million in the year-ago quarter. The gross
margin dropped 40 basis points (bps) year over year to 5.0%.
The difference can be traced back to operational interruptions
at the new enterprise system in Australia, competitive pricing in
some Asian markets, subdued retail demand in Europe and the
Asia-Pacific, and a higher mix of emerging markets revenue that
typically carry lower margins.
Selling, general and administrative expenses were $354.2
million, up 2.2% from $346.6 million in the year-ago quarter.
Operating profit was $85.4 million, compared to $106.9 million
in the prior-year quarter. Operating margin in the quarter
decreased 30 bps year over year to 1.0%.
Ingram Micro reported net income of $23.3 million, or 15 cents
per share, compared to $65.0 million, or 41 cents in the year-ago
quarter. Excluding reorganization costs, net foreign currency
exchange gain, loss from settlement of interest rate swap and
senior unsecured term loan, other non-operating expenses and tax
adjustments, adjusted net income was $54.4 million or 35 cents per
share.
Balance Sheet and Share Repurchase
Ingram Micro exited the third quarter with cash and cash
equivalents of $1.00 billion, down from $1.38 billion in the
previous quarter. Accounts receivable increased 4.2% sequentially
to $3.74 billion. Inventories were $3.10 billion, up from $3.08
billion in the prior quarter. Total debt balance was $439.5
million, down from $642.6 million in the previous quarter.
Ingram Micro paid $75.0 million to buy back 4.2 million shares
during the quarter. The company also purchased an additional 4.2
million shares for $75.0 million during October.
Guidance
Ingram Micro did not provide any specific guidance for the
fourth quarter of 2011 but expects sales to grow sequentially based
on historical trends. However, sales could grow on a year-over-year
basis, given consistent demand trends.
Management expects the transitional issue to be over by the next
quarter, which could lead to a market share gain in Australia. But
the company would take time to regain the full momentum in its
Australian business.
The company also expects the gross margin to increase
sequentially following a historical trend.
Based on the improving IT spending trend, increasing global
demand for its products and the completion target of the ERP
(enterprise resource planning) system implementation in Australia
within the coming three years, Ingram Micro is confident about
achieving operational excellence going ahead.
Conclusion
We find Ingram Micro’s third quarter results unimpressive as the
bottom line was just at par with the Zacks Consensus Estimate.
Ongoing softness in the retail sector in Europe and the
Asia-Pacific regions as well as the transition issue has
constrained Ingram from providing an encouraging guidance.
Though management is quite positive about having resolved most
of the issues in this quarter and has assured that it will regain
market share in Australia, we would prefer to take a cautious
stance on the stock.
Despite the uneventful quarter, we remain fairly optimistic
about Ingram Micro’s strategic relationship with network giant
Juniper Networks Inc. (JNPR), as well as tech
giants, such as Hewlett-Packard Company (HPQ),
International Business Machines Corp. (IBM) and
Microsoft Corp. (MSFT).
Ingram Micro’s high dependency on IT spending is a concern.
Though we remain positive about corporate IT spending, which should
see a slow but steady recovery through 2011, a slowing consumer
spending cannot be ignored. The company’s significant European
exposure and debt burden are also concerns.
Currently, Ingram Micro has a Zacks #4 Rank, implying a
short-term Sell rating.
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
INGRAM MICRO (IM): Free Stock Analysis Report
JUNIPER NETWRKS (JNPR): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
Zacks Investment Research
Ingram Micro A (NYSE:IM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Ingram Micro A (NYSE:IM)
Historical Stock Chart
From Jul 2023 to Jul 2024