Why Is Avnet (AVT) Down 0.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Avnet (AVT). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Avnet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Avnet Beats Q4 Earnings Estimates, Strong Guidance for Q1
Avnet reported better-than-expected fourth-quarter fiscal 2023 results. The company’s fiscal fourth-quarter non-GAAP earnings were $2.06 per share, which surpassed the Zacks Consensus Estimate of $1.63. However, the reported figure came a penny lower than the year-ago quarter’s non-GAAP earnings of $2.07 per share, mainly due to the negative impact of 39 cents from higher interest expenses.
Revenues advanced 2.9% year over year to $6.4 billion and beat the Zacks Consensus Estimate of $6.24 billion. On a constant-currency basis, fiscal fourth-quarter sales increased 2.9% year over year.
Avnet’s quarterly results benefited from better sales executions. Robust sales in the Americas and the EMEA bolstered revenues in the reported quarter.
Quarter Details
The Electronic Components segment’s revenues were up 3% year over year to $6.11 billion on stellar growth across the Americas and EMEA regions. Our estimate for the Electronic Components segment’s revenues was pegged at $5.79 billion.
The Farnell segment’s revenues increased 0.7% to $445.4 million. Our estimate for the Farnell segment’s revenues was pegged at $432.7 million.
Revenues from America increased 7.1% year over year, while the EMEA registered sales growth of 18.7%. However, sales from the Asia region plunged 11.9% year over year.
Avnet reported a gross profit of $818 million, up from the year-ago quarter’s gross profit of $779.6 million. The gross margin improved 30 basis points (bps) year over year to 12.5%.
The adjusted operating income came in at $312.6 million, rising 8.7% year over year. The adjusted operating margin came in at 4.8%, up 26 bps.
Balance Sheet and Cash Flow
As of Jul 1, 2023, AVT had cash and cash equivalents of $288.2 million compared with the $185.9 million reported at the end of the previous quarter.
The long-term debt was $2.99 billion as of Jul 1, down from the $3.03 billion reported in the prior quarter. Avnet generated operating cash flow of $234.5 million in the fourth quarter while using cash worth $713.7 million for operational activities during the full-fiscal 2023.
The company repurchased shares worth $221.7 million and returned $106.3 million to shareholders through dividend payouts in fiscal 2023.
First-Quarter Fiscal 2024 Guidance
Avnet estimates first-quarter fiscal 2024 revenues in the range of $6.15-$6.45 billion (midpoint $6.30 billion). Non-GAAP earnings for the current quarter are anticipated in the range of $1.45-$1.55 per share (midpoint $1.50). The Zacks Consensus Estimate for first-quarter revenues and adjusted earnings is pegged at $5.90 billion and $1.34 per share, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 11.9% due to these changes.
VGM Scores
Currently, Avnet has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Avnet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Avnet belongs to the Zacks Electronics - Parts Distribution industry. Another stock from the same industry, Wesco International (WCC), has gained 4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Wesco International reported revenues of $5.75 billion in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $3.71 for the same period compares with $4.19 a year ago.
Wesco International is expected to post earnings of $3.87 per share for the current quarter, representing a year-over-year change of -13.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Wesco International. Also, the stock has a VGM Score of A.
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