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A month has gone by since the last earnings report for Synnex (SNX). Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Synnex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
SYNNEX Q4 Earnings & Revenues Top Estimates, Up Y/Y
SYNNEX delivered stellar fourth-quarter fiscal 2020 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate and marked year-over-year improvements as well. The company’s fiscal fourth-quarter non-GAAP earnings of $5.21 per share topped the Zacks Consensus Estimate of $3.83 and came in higher than the year-ago quarter’s $4.26.
Revenues grew to $7.41 billion from the year-earlier quarter’s $6.58 billion. The top-line figure also beat the Zacks Consensus Estimate of $6.57 billion.
Gross profit grew 4% year over year to $823 million, while margin contracted 100 basis points (bps) to 11.1%. Total selling, general & administrative (SG&A) expenses declined to $503 million from the year-ago quarter’s $526 million, mainly due to continued Concentrix synergies associated to the Convergys acquisition and lower Concentrix variable operating expenses.
In the reported quarter, non-GAAP operating income was up 14.7% to $388.2 million. Also, non-GAAP operating margin expanded 10 bps on a year-over-year basis to 5.24%.
Segment wise, SYNNEX’s Technology Solutions revenues increased 13.9% year on year to $6.1 billion. Concentrix business revenues climbed 7.3% year over year to $1.3 billion.
Non-GAAP operating income for Technology Solutions was $216.2 million, up 21.6% from the prior-year quarter. For the Concentrix segment, non-GAAP operating income was $172 million, up 7% year on year.
SYNNEX ended the fiscal fourth quarter with cash and cash equivalents of $1.41 billion compared with the $1.45 billion witnessed at the end of the fiscal third quarter. During the fiscal fourth quarter, the company generated $297 million of cash flow from operational activities.
Additionally, the company announced that its board of directors reinstated a quarterly cash dividend of 20 cents per share. The newly-approved dividend will be payable on Jan 29 to shareholders of record date as of Jan 22, 2021.
For the first quarter of fiscal 2021, revenues are expected between $4.5 billion and $4.8 billion.
Non-GAAP net income is estimated in the range of $81-$91.5 million. Moreover, the company projects non-GAAP earnings between $1.55 and $1.75 per share.
Further, the company stated that it has completed the previous announcement of splitting its Concentrix business into a separate publicly-traded company on Dec 1, 2020. With this separation, SYNNEX is now left with its Technology Solution business. The separated business has been named Concentrix Corporation. Management believes this strategic action would help add shareholder value and enhance the company's competitive edge.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -43.23% due to these changes.
At this time, Synnex has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Synnex has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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