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Avnet (AVT) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Avnet, Inc. AVT is set to report second-quarter fiscal 2019 results on Jan 24.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average positive earnings surprise being 4.66%.

In the last reported quarter, the company’s non-GAAP earnings per share of $1.03 increased 35.5% year over year and surpassed the Zacks Consensus Estimate of $1.01. Moreover, Avnet’s revenues grew 9.2% to $5.09 billion and topped the consensus estimate of $4.98 billion.

For second-quarter fiscal 2019, Avnet expects revenues in the range of $4.9-$5.3 billion. The Zacks Consensus Estimate stands at $5.06 billion. The company expects non-GAAP earnings per share in the range of 98 cents to $1.08. The consensus estimate is pegged at $1.03.

Let’s see how things are shaping up for the upcoming announcement.

Avnet, Inc. Price and EPS Surprise

Avnet, Inc. Price and EPS Surprise | Avnet, Inc. Quote

Factors at Play
    
Avnet is benefitting from strong performance of Electronics Components and Premier Farnell segments. Continued transformation efforts and commitment to accelerate the Electronic Components business, including the replacement of revenues from supplier program changes, is driving growth. The Zacks Consensus Estimate for The Electronic Components segment in the fiscal first quarter is pegged at $165 million, indicating year-over-year growth of 27%.

Moreover, the company’s supplier line card in its components business continues to expand. Avnet added five new franchises across connectivity, power control, programmable logic devices in the last reported quarter. This trend is expected to continue in the fiscal second quarter.

On the IoT front, the company has made several partnerships with the likes of AT&T T, as well as acquisitions, such as Premier Farnell and Hackster.io, to enhance its capabilities in this space. Per Avnet, the acquisitions have expanded its “reach to more than two million customers and an active community of more than 750,000 entrepreneurs, makers and engineers.” In first-quarter fiscal 2019, its IoT solutions witnessed 15% customer additions and 30% revenue pipeline expansion. The Zacks Consensus Estimate for The Premier Farnell segment in the fiscal first quarter is pegged at $378 million, indicating year-over-year growth of 5.6%.

The company’s e-commerce business is also showing strong momentum, owing to its efforts to enhance customer engagement, which is a major positive.

Avnet is also benefitting from design engagement. In the last reported quarter, the company opened a new design center in Guadalajara, Mexico, providing better access to design engineers at favorable cost profiles.

Avnet’s recent addition of new customers in blockchain, pharmaceuticals, healthcare, fast food, consumer goods and furniture making bodes well for the top-line, as they provide new revenue streams.

Notably, Microsoft’s MSFT partnership with Avnet on the new 4X4 Azure Sphere chip is helping the latter gain more customer opportunities. This is likely to reflect positively in the quarterly results.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Avnet has an Earnings ESP of 0.00% and carries a Zacks Rank #3.

A Stock With Favorable Combination

Here are is a stock, which per our model has the right combination of elements to post an earnings beat this quarter:

Twitter, Inc. TWTR has an Earnings ESP of +26.55% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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