ScanSource (SCSC) Q2 Earnings & Sales Beat Estimates, Up Y/Y
ScanSource, Inc. SCSC reported second-quarter fiscal 2022 (ended Dec 31, 2021) adjusted earnings of $1.02 share, which beat the Zacks Consensus Estimate of 83 cents. The bottom line improved 57% from the prior-year quarter’s earnings of 65 cents, courtesy of strong demand.
On a reported basis, the company delivered earnings of 89 cents per share against the prior-year quarter’s 43 cents per share.
The company reported net sales of $864.3 million in the reported quarter, up 7% from the year-ago quarter, driven by strong demand. The top line surpassed the Zacks Consensus Estimate of $837 million. Excluding foreign exchange impact, net sales were around $867 million in the quarter under review.
ScanSource, Inc. Price, Consensus and EPS Surprise
ScanSource, Inc. price-consensus-eps-surprise-chart | ScanSource, Inc. Quote
Net sales in the United States and Canada were up 7.5% to $774 million, while international sales dipped 0.5% to $90 million.
Specialty Technology Solutions’ revenues increased 9.2% to $496.9 million in second-quarter 2022, courtesy of broad-based growth across technologies.
Sales at Modern Communications & Cloud were $367 million in the reported quarter, up 3.3% year over year. Meanwhile, Intelisys connectivity and cloud business net sales increased 14.1% year over year.
Operational Update
Cost of sales amounted to $756 million in second-quarter 2022, up 4.4% from the year-ago quarter. The gross profit totaled $107.9 million, reflecting an improvement of 25% over the year-ago quarter’s $86 million. The gross margin came in at 12.5% during the reported quarter compared with the prior-year quarter’s 10.6%. The 188 basis point expansion was attributable to sales volume, sales mix and higher supplier sales incentives compared to the prior-year quarter.
Selling, general and administrative expenses flared up 15% year over year to $69 million. The adjusted operating profit was $35.9 million compared with the prior-year quarter’s $23.8 million. The adjusted operating margin was 4.2% compared with the prior-year quarter’s 2.9%. Adjusted EBITDA climbed 43% year over year to $42.5 million on account of higher gross profits and operating leverage.
Financial Condition
The company reported cash and cash equivalents of $34 million as of Dec 31, 2021 compared with $63 million as of Jun 30, 2021. The company utilized $75 million of cash in operating activities in the first half of fiscal 2022 compared with an inflow of $116 million in the prior-year comparable period. The company’s total debt was $139 million at the end of the second quarter of 2022, down from $143 million at the fiscal 2021 end.
Outlook
Backed by strong demand from channel partners across its technologies, ScanSource raised its guidance for fiscal 2022. The company now expects net sales growth of at least 7%, up from its previous expectation of 5.5%. Adjusted EBITDA is projected to be at least $148 million, higher than the $135 million expected earlier.
Share Price Performance
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ScanSource's shares have gained 7.2% over the past year against the industry’s decline of 48.8%.
Zacks Rank and Stocks to Consider
ScanSource currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Dover Corporation DOV, Silgan Holdings Inc. SLGN and Applied Industrial Technologies, Inc. AIT. While DOV sports a Zacks Rank #1 (Strong Buy), SLGN and AIT carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dover’s fourth-quarter 2021 adjusted EPS increased 15% year over year to $1.78, beating the Zacks Consensus Estimate of $1.66. DOV has a trailing four-quarter earnings surprise of 12.3%, on average.
Dover has an estimated earnings growth rate of around 12.7% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 4%. DOV’s shares have rallied around 34.7% in a year.
Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.
Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. In a year, SLGN has appreciated 13.9%.
Applied Industrial Technologies reported adjusted EPS of $1.46 in second-quarter fiscal 2022 (ended Dec 31, 2020), which beat the Zacks Consensus Estimate of $1.09 and improved 49% year over year. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.
Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal year earnings has moved up 9.4% in the past 60 days. AIT’s shares have appreciated 17.1% in a year.
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