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Tech Data (TECD) Q4 Earnings Beat Estimates, Sales Miss

Zacks Equity Research

Tech Data Corporation TECD posted fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, while sales lagged the same. Further, shares of the company fell 6.8% during the trading session on Mar 7. This might be due to the company’s soft bottom-line view of $1.80-$2.10 per share for first-quarter fiscal 2020 whose midpoint of $1.95 clearly came below the Zacks Consensus Estimate of $2.09.

We note that shares of this Zacks Rank #2 (Buy) company have gained 8.2% in the past three months, underperforming the industry’s growth of 19.2%.



Q4 Details

The company reported adjusted earnings of $4.55 per share in the reported quarter. The figure not only surpassed the Zacks Consensus Estimate of $4.10 but also increased 30% on a year-over-year basis.

Moreover, net sales of $10,464.5 million increased 4% year over year, backed by solid sales performance in the Americas with robust growth in cloud, storage, networking and notebooks. However, the figure lagged the consensus mark of $10,706 million. Net sales rose 8% on a constant-currency (cc) basis.

Net sales from the Americas (41% of global net sales) rose 10% to $4.2 billion. Sales from Europe (56% of global net sales) remained flat at $5.9 billion. Sales from Asia-Pacific (3% of global net sales) increased 8% to $327.7 million.

Margins

The company’s gross profit improved 5% to $649.1 million in the reported quarter. Gross margin expanded 5 basis points (bps) from the year-ago quarter to 6.2% driven by hike in vendor price due to a change in trade policy. Adjusted selling, general & administrative (SG&A) expenses rose 3% to $388.3 million in the quarter under review. Adjusted selling, general & administrative expenses as percentage of revenues decreased 29 bps to 3.7% in the reported quarter.

Adjusted operating income came in at $260.9 million, up 21% from $216 million in the year-ago quarter. Adjusted operating margin expanded 34 bps to 2.5%. Segment wise, operating margin expanded 74 bps for the Americas, 4 bps for Europe and 52 bps for Asia-Pacific.

Balance Sheet and Cash Flow

As of Jan 31, 2019, Tech Data had cash and cash equivalents of approximately $799.1 million, long-term debt of $1,300.6 million and total stockholders’ equity of $2,936.7 million.

During the quarter, the company bought back 808,000 shares for $63 million. Tech Data generated cash from operations of $231 million.

Tech Data Corporation Price, Consensus and EPS Surprise

Tech Data Corporation Price, Consensus and EPS Surprise | Tech Data Corporation Quote

Outlook

Tech Data issued first-quarter fiscal 2020 view, wherein the company anticipates sales to be $8.3-$8.6 billion. Further, it expects results to be affected by unfavorable currency movement. Notably, currency headwinds will affect the bottom line by roughly 7 cents and the top line by nearly 4%. Capital expenditure is projected to be $90-$100 million along with tax rate of 24-26% for first-quarter fiscal 2019.

The company projects top-line growth in low-single digit, while adjusted earnings are expected to rise about 10% for fiscal 2020. Moreover, adjusted operating income is expected to grow mid-single digits on the back of the GBL program, which aims at cost efficiencies. Also, management announced additional $100 million to its existing share repurchase program.

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