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Avnet (AVT) Surpasses Q1 Earnings and Revenue Estimates

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Avnet AVT delivered first-quarter fiscal 2021 non-GAAP earnings of 36 cents per share, surpassing the Zacks Consensus Estimate of 12 cents. However, the reported figure plunged 40% year over year.

Revenues of $4.7 billion also outpaced the Zacks Consensus Estimate by 16.7% and grew 2% year over year mainly owing to an extra business week during the fiscal first quarter.

Robust sales in Asia and Europe, Middle East, and Africa (EMEA) boosted revenues during the quarter and more than offset the weakness in Americas. However, higher cost of sales and operating expenses hurt the bottom line.

Quarter in Detail

Electronic Components segment revenues inched up 0.7% year over year to $4.38 billion on strong growth in the Asia region. This more than negated the negative impact of lower revenues from the Americas and the EMEA regions.

Avnet, Inc. Price, Consensus and EPS Surprise

Avnet, Inc. Price, Consensus and EPS Surprise
Avnet, Inc. Price, Consensus and EPS Surprise

Avnet, Inc. price-consensus-eps-surprise-chart | Avnet, Inc. Quote

The Premier Farnell segment’s revenues of $340.9 million increased 1.5% year over year.

Revenues from the Americas declined 0.8% year over year and 3.6% from the EMEA region. Nonetheless, Asia revenues increased 4.6% year over year.

Avnet reported gross profit of $516.1 million, down 5.1% year over year. Gross margin contracted 49 basis points (bps) to 10.9%.

Adjusted operating income was $65.1 million, plunging 39.4% year over year. Adjusted operating margin came in at 1.4%, down 90 bps.

Adjusted operating expenses flared up 3.3% year over year to $451 million chiefly due to an extra business week during the first quarter.

Per management, Avnet’s $75-million cost-cutting plan announced during fourth-quarter fiscal 2020 is on track and will likely be fully implemented during the second quarter of fiscal 2021. Under this plan, the company aims to reduce net operating expenses by $75 million annually, and improve operating income and returns on capital.

Balance Sheet and Cash Flow

As of Sep 30, 2020, Avnet had cash and cash equivalents of $483 million compared with the $477 million recorded at the end of the previous quarter.

Long-term debt was $1.2 billion as of Sep 30, up from the $1.43 billion reported in the prior quarter. The company used $63 million in cash to pay-off debt.

Net debt leverage ratio was 2.2 at the end of the reported quarter. Operating cash flow was $122.4 million in first-quarter fiscal 2020. Avnet returned $20.8 million to its shareholders in the form of dividends in the reported quarter.

Second-Quarter Fiscal 2021 Guidance

Avnet estimates fiscal second-quarter revenues to be in the range of $4 -$4.4 billion. Non-GAAP adjusted earnings for the current quarter are anticipated to be in the range of 33 cents to 43 cents per share.

Zacks Rank and Stocks to Consider

FireEye currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Zoom Video Communications ZM, Viasat VSAT and CDW Corporation CDW, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Viasat and CDW is currently pegged at 25%, 19%, and 13.1%, respectively.

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