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Arrow Beats on Q4 Earnings, Revs

Zacks Equity Research

Arrow Electronics Inc. (ARW) reported fourth-quarter 2013 adjusted earnings per share of $1.69, which beat the Zacks Consensus Estimate of $1.62. On a year-over-year basis, earnings per share increased 30.8% and came ahead of management’s guided range of $1.56 and $1.68.

Quarter Details

Arrow’s revenues on a reported basis came in at $6.15 billion which increased 13.9% from the year-ago quarter andwas also above management’s guided range of $5.6 to $6.0 billion. Reported revenues also surpassed the Zacks Consensus Estimate of $5.79 billion. On an adjusted basis, revenues increased 8.4% from the year-ago quarter to $6.25 billion. The company’s book-to-bill ratio was 1.03.

On a segmental basis, revenues from Global components increased 7.9% on a year-over-year basis to $3.44 billion. Adjusted revenues grew 5.8% from the year-ago quarter to $3.46 billion. Revenues from America increased 3%, while Asia-Pacific revenues increased 9%. Adjusted European revenues increased 9.9% on a year-over-year basis boosted segment revenues.

Revenues from Global enterprise computing solutions (:ECS) came in at $2.72 billion, up 22.5% year over year. Adjusted revenues increased 11.9%. Revenues were boosted by Arrow’s solid performance in the value-added services, strong execution capabilities and diversified product offerings. Revenues from America grew 13% and revenues from Europe were up 23% year over year.

Arrow reported adjusted operating margins of 4.3% which was up 52 basis points (bps) from the year-ago quarter primarily due to lower operating expenses as a percentage of revenues. Adjusted operating expenses increased 4.1% from the year-ago quarter to $522.0 million but were down 80 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 $172.0 million or $1.69 per share compared with $139.6 million or $1.29 per share in the year-ago quarter.

Arrow ended the quarter with cash and cash equivalents of $390.6 million, up from $251.8 million at the end of the previous quarter. Long-term debt was $2.23 billion, up from $1.91 billion at the end of the previous quarter. During the quarter, the company generated $215.0 million in cash from operations. During the reported quarter, Arrow repurchased shares worth $50 million.


For the first quarter of 2014, Arrow expects sales to range between $5.1 and $5.5 billion, reflecting a sequential decline. The Zacks Consensus Estimate is pegged at $5.30 billion.

Global components sales are projected between $3.3 and $3.5 billion. Global enterprise computing solutions sales are estimated between $1.8 and $2.0 billion. The company expects non-GAAP earnings to range between $1.14 and $1.26 (mid-point $1.20 per share), down sequentially and lower than the Zacks Consensus Estimate of $1.23 per share.

Our Take

Electronic component distributor Arrow posted better-than-expected fourth-quarter results. Year-over-year comparisons were modestly up and the company had a favorable book-to-bill ratio. Moreover, positive commentary about enhanced productivity, annual cost savings and continued higher contributions from Europe are encouraging. Additionally, incremental sales from the strategic acquisitions, such as Computerlinks, are expected to boost Arrow’s top line, going forward.

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

Currently, Arrow has a Zacks Rank #3 (Hold). Apart from Arrow, investors may  consider Broadridge Financial Solutions (BR) that has a Zacks Rank #1 (Strong Buy).

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