Earnings Preview: Tech Data Corp. - Analyst Blog
August 20 2012 - 6:45AM
Zacks
Tech Data Corp.
(TECD) is scheduled to release its fiscal second quarter 2013
results before the market opens on August 21, 2012.
In the run up to the earnings
release, there have been a couple of negative estimate
revisions. However, Tech Data has outperformed the Zacks Consensus
Estimate by an average of 6.76% over the last four quarters, and we
expect this to continue in the second quarter.
First Quarter
Highlights
Tech Data reported mixed first
quarter results. The bottom line of $1.24 surpassed the Zacks
Consensus Estimate of $1.17 and was up 20.4% on a year-over-year
basis, aided by lower costs and margin expansions.
However, the company’s top line of
$5.89 billion not only missed the Zacks Consensus Estimate of $6.18
billion, but was down 6.9% on a year-over-year basis. Revenues
declined due to unfavorable foreign exchange rates, revised
representation of sales of vendor warranty services and certain
fulfillment contracts.
For further details please read:
Tech Data Reports Mixed 1Q
Earnings Estimate
Trends
Over the past 30 days, two out of
nine analysts covering the stock revised their estimates downward
with no upward revision. The Zacks Consensus Estimate for the
second quarter dropped a couple of cents to $1.18 per share in that
time.
Analysts covering the stock expect a
decline in the top line due to weaker-than-expected demand in the
PCs and servers segment. Looking at the individual regions, the
company’s revenue mix is highly skewed to Europe, which is reeling
under economic pressure. This will act as a headwind going
forward. Though the bottom line of has outperformed the estimates
of late; analysts expect a slide in its earnings due to sluggish
revenue.
Recommendation
We believe that Tech Data faces a
number of headwinds in the near term, including a volatile European
market (approximately 60.0% of revenue) and a lack of visibility in
U.S. government spending. Moreover, it faces tough competition from
Ingram Micro Inc. (IM) and SYNNEX
Corp (SNX).
However, we believe that the
company’s profitability will be driven by higher HDD pricing in the
near term. Tech Data’s strategy of shifting resources from
lower-performing regions to higher-growth regions, cost reductions
and accretive acquisitions will drive growth over the long
term.
Thus, we maintain our long-term
Neutral recommendation on the stock. Currently, the stock holds a
Zacks #4 Rank, implying a short-term ‘Sell’ rating.
INGRAM MICRO (IM): Free Stock Analysis Report
SYNNEX CORP (SNX): Free Stock Analysis Report
TECH DATA CORP (TECD): Free Stock Analysis Report
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