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Arrow Electronics (ARW) Q2 Earnings: Stock to Surprise?

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The electronic component distributor Arrow Electronics Inc. (ARW - Free Report) is anticipated to report second-quarter 2016 results on Jul 26. Last quarter, the company posted a positive earnings surprise of 2.14%. Notably, the company has surpassed the Zacks Consensus Estimate thrice in the four preceding quarters with an average positive surprise of 1.66%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Arrow is one of the world’s largest distributors of electronic components and enterprise computing products. The company’s strong distribution channels are being preferred by original equipment manufacturers, contract manufacturers and commercial customers for marketing. Its core strength in providing best-in-class services and easy-to-acquire technologies will act as growth catalysts in the to-be reported quarter.

Moreover, the company has secured a significant market share through its broad portfolio of products and services, and continued efforts to maximize consumer satisfaction. Additionally, incremental sales from strategic acquisitions are expected to boost the company’s top line in the to-be-reported quarter.

Furthermore, during the first-quarter 2016 earnings release, Arrow’s management provided an encouraging guidance, which makes us optimistic about the company’s second-quarter performance.

Nonetheless, unfavorable currency exchange rates, uncertain economic conditions, high debt burden and competition from the likes of Avnet (AVT - Free Report) and Ingram Micro remain major concerns.

ARROW ELECTRONI Price and EPS Surprise

ARROW ELECTRONI Price and EPS Surprise | ARROW ELECTRONI Quote

Earnings Whispers

Our proven model does not conclusively show that Arrow is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimates. However, that is not the case here, as you will see below.

Zacks ESP: Arrow has an Earnings ESP of 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.66.

Zacks Rank: Arrow’s Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are a couple of companies that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Open Text Corp. (OTEX - Free Report) , with an Earnings ESP of +1.10% and a Zacks Rank #1.

Diebold, Incorporated (DBD - Free Report) , with an Earnings ESP of +5.00% and a Zacks Rank #2.

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