Raymond James: Macro Headwinds Ahead for Avnet
Avnet, Inc. (NASDAQ: AVT) reported second-quarter results Thursday that were in-line with expectations, but its Q3 guidance reflected softness in Asia revenue.
Although the company's largest region is facing macro challenges, Avnet’s run rate EPS in the current quarter should be higher than $4, while cost optimization is only about one-third complete, according to Raymond James.
The Analyst
Analyst Adam Tindle maintains a Strong Buy rating on Avnet with an unchanged $52 price target.
The Thesis
The initial focus is likely to be on Avnet’s guidance, Tindle said in a Friday note.
The company is controlling what it can and has a long runway left in cost optimization, the analyst said. With Avnet’s shares trading around $40, the margin of safety seems compelling, he said.
The midpoint of the March guidance implies a sequential decline in revenue of around 7 percent, which is significantly below seasonal norms of 5-percent growth, Tindle said.
Raymond James cut its 2019 revenue and EPS estimates from $20.5 billion to $19.7 billion and from $4.21 to $4.20, respectively. The revenue and EPS estimates for 2020 have been lowered from $20 billion to $19.3 billion and from $4.46 to $4.40, respectively.
Avnet management repurchased about 5 million shares in Q2. The authorization, estimated at around 10 percent of the electronics company's market cap, presents “the right combination for value creation over time, and this narrative should ultimately trump near-term macro headwinds,” Tindle said.
Price Action
Avnet shares were down 1.13 percent at $41.18 at the time of publication Friday.
Related Links:
Avnet's Revenue Recovery, Margin Improvement Trigger Bank Of America Upgrade
Earnings Scheduled For January 24, 2019
Photo courtesy of Avnet.
Latest Ratings for AVT
Oct 2018 | Citigroup | Upgrades | Sell | Neutral |
Aug 2018 | Bank of America | Upgrades | Neutral | Buy |
Aug 2018 | Citigroup | Maintains | Sell | Sell |
View More Analyst Ratings for AVT
View the Latest Analyst Ratings
See more from Benzinga
Credit Suisse Stays Bullish On Norfolk Southern After Q4 Print
Raymond James Raises Comcast Price Target To Reflect Sky Synergies, Broadband Sub Growth
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
