ScanSource (SCSC) Misses Q2 Earnings Estimates, Lowers View
ScanSource, Inc. SCSC reported adjusted earnings of 85 cents per share in second-quarter fiscal 2024 (ended Dec 31, 2023), missing the Zacks Consensus Estimate of 99 cents. The bottom line declined 20% from the year-ago quarter’s earnings of $1.06 per share. Results were impacted by soft demand in barcode, mobility and point of sale as well as lower sales volumes in communications hardware.
On a reported basis, the company delivered earnings of $1.29 per share compared with the year-ago quarter’s earnings of $1.01 per share.
The company reported net sales of $885 million in the reported quarter, down 12.5% from the year-ago quarter’s levels. The top line missed the Zacks Consensus Estimate of $953 million.
Net sales in the United States and Canada were down 12.5% year over year to $795 million. International sales declined 17% to $82.6 million.
ScanSource, Inc. Price, Consensus and EPS Surprise
ScanSource, Inc. price-consensus-eps-surprise-chart | ScanSource, Inc. Quote
Specialty Technology Solutions’ revenues fell 17% to $521 million in second-quarter fiscal 2024, as weak demand in barcode, mobility and point of sale was partially offset by growth in networking.
Sales at Modern Communications & Cloud dipped 5% year over year to $364 million in the reported quarter. Low sales volumes in communications hardware were partially offset by growth in Cisco products. Intelisys net sales for the second quarter, however, increased 7.5%.
Operational Update
The cost of sales amounted to $784 million in the fiscal second quarter, down 12.5% from the year-ago quarter’s levels. The gross profit totaled $100.7 million, down 13% from the year-ago quarter’s $115.3 million. The gross margin was 11.4% during the reported quarter, flat compared with the second quarter of fiscal 2024.
Selling, general and administrative expenses decreased 3% year over year to $67 million. The adjusted operating profit was $30.6 million in the quarter under review in comparison with the year-ago quarter’s $40.7 million. The adjusted operating margin was 3.5% compared with 4.0% reported in the year-ago quarter.
Adjusted EBITDA was down 21% year over year to $38 million. Adjusted EBITDA margin was 4.3% in the quarter under discussion compared with 4.8% in the year-ago quarter.
Cash Position & Balance Sheet
The company reported cash and cash equivalents of $45 million as of Dec 31, 2023, in comparison with $36 million as of Jun 30, 2023. The company generated around $157 million in cash from operating activities in the first half of fiscal 2024 against a usage of $75 million in the year-ago comparable period. The company’s long-term debt was $140 million as of Dec 31, 2023, down from $144 million as of Jun 30, 2023.
Fiscal 2024 Outlook
ScanSource expects net sales to be at least $3.5 billion in fiscal 2024. The company had earlier projected net sales growth of at least $3.8 billion. SCSC had reported sales of $3.78 billion in fiscal 2023.
Adjusted EBITDA is now projected to be at least $155 million. SCSC had previously stated that it expected EBITDA of at least $170 million. The company expects a free cash flow of at least $200 million.
Price Performance
ScanSource's shares have gained 17.8% in the past year compared with the industry’s 12.6% growth.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
ScanSource currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Cadre Holdings, Inc. CDRE, AZZ Inc. AZZ and Applied Industrial Technologies AIT. CDRE currently sports a Zacks Rank #1 (Strong Buy), and AZZ and AIT carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cadre Holdings’ 2024 earnings is pegged at $1.11 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 16.7%. The company has a trailing four-quarter average earnings surprise of 33%. CDRE shares have gained 48.6% in the past year.
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved 2% north in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 56.7% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have been unchanged in the past 60 days. The company’s shares have gained 25.7% in a year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
AZZ Inc. (AZZ) : Free Stock Analysis Report
ScanSource, Inc. (SCSC) : Free Stock Analysis Report
Cadre Holdings, Inc. (CDRE) : Free Stock Analysis Report
