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Ingram Micro Beats on Q4 Earnings

Zacks Equity Research

Ingram Micro Inc. (IM) reported fourth-quarter 2013 non-GAAP earnings (excluding amortization of intangible assets, reorganization charges and foreign exchange gains) of 88 cents per share, beating the Zacks Consensus Estimate of 80 cents. Earnings also improved 17.1% on a year-over-year basis primarily due to a higher revenue base and improvement in the mobility business.


Ingram Micro’s fourth-quarter revenues of $11.8 billion came ahead of the Zacks Consensus Estimate of $11.5 billion and increased 3.9% from the year-ago quarter. The year-over-year improvement was primarily due to better-than-expected growth in Europe and Latin America.

Geographically, revenues from North America were approximately flat on a year-over- year basis and came in at $4.46 billion. Revenues from Europe increased 7.4% on a year-over-year basis to $3.32 billion. Moreover, revenues from Asia-Pacific and Latin America were up 1.7% and 13.1%, on a year-over-year basis, to $2.22 billion and $681.5 million, respectively. Brightpoint contributed $1.15 billion to quarterly revenues, up 10.2% year over year.

Revenues from Europe were positively impacted by new client additions and higher product adoption. Moreover, strong performances from Australia and India driven by growth across different product lines supported revenues. Additionally, strong performance of its mobility business helped revenues. Ingram Micro’s mobility business contributed $1.1 billion to quarterly revenues.

It is worth noting that Ingram Micro’s acquisition of CloudBlue and Shipwire will expand its supply chain capabilities, while the acquisition of SoftCom will help to enhance its cloud-based offerings.

Operating Results

Ingram Micro’s gross margin improved 19 basis points (bps) on a year-over-year basis to 6.0%. The improvement was mainly attributable to solid performances in the mobility business and higher sales.

Selling, general and administrative expenses increased 6.6% year over year to $509.4 million. Ingram Micro reported an increase in operating expense as a percentage of revenue (up 21 bps on a year-over-year basis) which came in at 4.5%, primarily due to continued investments across all of its operating regions. The company’s non-GAAP operating margin increased 12 bps from the year-ago quarter to 1.8%.  

Ingram Micro reported non-GAAP net income of $139.1 million or 88 cents per share compared with $115.2 million or 75 cents in the year-ago quarter. Non-GAAP net income excluded the effect of intangible assets, reorganization charges and foreign exchange gains.

Balance Sheet & Cash Flow

Ingram Micro exited the fourth-quarter with cash and cash equivalents of $674.4 million, up from $501.6 million in the previous quarter. Accounts receivable were $5.45 billion. Total debt (including current portion) was $846.2 million, down from $890.6 billion in the previous quarter.

The company reported cash flow from operations of $353.0 million in the fourth-quarter of 2013.


For the first-quarter of 2014, Ingram Micro expects a low double-digit sequential decline in revenues. Gross margin is expected to decline on a sequential basis. Diluted shares outstanding are expected to be 158.5 million.

For full year 2014, Ingram Micro expects a low to mid-single digit growth in revenues. The company also expects its non-GAAP operating results to improve in fiscal 2014 due to continued execution and improvement across all its operating regions.


Ingram Micro’s fourth-quarter results were better-than expected with both the top and bottom lines surpassing the Zacks Consensus Estimate. We believe that the improving IT spending trend will help Ingram to post better results going forward. Moreover, the company’s focus on the high-margin market and strategic acquisitions to increase market share is encouraging. The Brightpoint acquisition is also expected to remain a key growth driver for the company.

Ingram Micro has been striking distribution deals with a number of original equipment manufacturers thus expanding its product portfolio. Moreover, Ingram Micro’s exposure in cloud computing products is also expected to remain a key growth driver for the company.

Though Ingram Micro’s significant European exposure and a high debt burden are concerns, we remain fairly optimistic about the company’s strategic relationships with network giants such as Juniper Networks Inc. (JNPR), Cisco (CSCO) and International Business Machines Corp. (IBM)

Currently, Ingram Micro has a Zacks Rank #2 (Buy).

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