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Avnet Conflates with MEAS

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Avnet Inc.’s (AVT) operating unit, Avnet Electronics Marketing Americas, recently entered into a distribution contract with Measurement Specialties, Inc. (MEAS). This will introduce Measurement Specialties’ wide range of packaged sensors services to Avnet’s distribution channel database catering to the needs of its comprehensive clientele in the field of industrial, medical, defense/aerospace, test and measurement and transportation.

Avnet shall render various technical support solutions for upgrading Measurement Specialties’ latest plug and play sensors product lines which help system designers to generate systems that are less costly and energy-efficient. With the venture, Measurement Specialties’ will be able to extend its coverage and efficiently address the need of more customers.

Management was appeased regarding its decision to conflate with Measurement Specialties, as this agreement would help Avnet’s clients to easily deploy Measurement Specialties’ embedded and off-the-board sensor solutions, which are primarily required for critical monitoring, feedback and control and input ability. Measurement Specialties’ energy-efficient plug and play sensor solutions services are expected to provide easier and less costly solutions to the company’s customers.

The company’s continuous contract wins and strategic acquisitions are expected to boost its long-term potential. Recently the company reported revenues of $5.87 billion, down 8.7% year over year and nearly 7% sequentially. The year-over-year decline was caused by the company’s weak businesses, especially in the Western region. The revenues in the quarter, however, were within management’s guidance range of $5.80 billion to $6.40 billion. Revenues from Electronics Marketing (EM) declined 4.3% from the year-ago quarter to $3.65 billion; within management’s guidance range of $3.55 billion - $3.85 billion. The annual decline was due to the weak industrial end markets.

Avnet’s domestic and foreign operations are subject to significant competitive pressures. It faces stiff competition from Arrow Electronics Inc. (ARW), which remains a fiercely formidable rival. Arrow’s operating unit, Arrow Enterprise Computing Solutions (:ECS), recently signed a distribution agreement with Emerson Network Power. The venture undertaken is to directly distribute Emerson’s real-time infrastructure optimization Trellis portal in order to improve the efficacy of the data center. Hence, the company must excel in terms of product quality and innovation, customer service, technical and computing capabilities and price competitiveness.

The current Zacks Consensus Estimates for the second quarter of fiscal 2013 and for fiscal 2013 are 82 cents and $3.09, representing year-over-year growth of (28.60%) and (23.92%), respectively. The company currently retains a Zacks #5 Rank, which translates into a short-term ‘Strong Sell’ rating. However, we are maintaining a long-term ‘Underperform’ recommendation on the stock.

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