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Tech Data (TECD) Q2 Earnings: What to Expect this Time?

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Tech Data Corp. is set to release second-quarter fiscal 2017 results on Aug 27. Last quarter, the company posted a positive earnings surprise of 10.53%. It delivered positive surprises in three of the trailing four quarters, with an average beat of 14.71%.

Let us see how things are shaping up for this announcement.

Factors at Play

Tech Data has been undertaking strategic initiatives to review and strengthen its operations including collaboration with new vendors and expansion of its coverage model.  Additionally, the company has been focusing on developing its capabilities in integrated supply chain, value-added services, data center, cloud and consumer electronics, which is a positive. The company’s cost-control measures are already boosting profitability.

The company had earlier taken some initiatives to focus more on high-growth areas in the Americas as a result of which it witnessed solid growth last quarter

In Jun 2016, Tech Data partnered with Actsoft. Other developments in the quarter were the launch of Advanced Technologies Playbook and the addition of independent software vendors (ISVs) on the platform for supporting the Microsoft (MSFT - Free Report) solutions ecosystem offered by Tech Data’s cloud business unit. The company also started the new Security and Information Management business unit

However, its exit from businesses in less profitable regions, though a positive in the long run, will weigh on near-term results. Also, Tech Data’s business has been affected by sluggish demand owing to a slowdown in the PC market.

For the second quarter of fiscal 2017, management expects revenues in a range of $6.55 billion to $6.75 billion (on a constant currency basis). Tech Data projects non-GAAP earnings per share in the range of $1.39 to $1.49.

TECH DATA CORP Price, Consensus and EPS Surprise

 

TECH DATA CORP Price, Consensus and EPS Surprise | TECH DATA CORP Quote

Earnings Whispers

Our proven model does not conclusively show that Tech Data is likely to beat earnings in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Tech Data is-2.08%. This is because the Most Accurate estimate of $1.41 is below the Zacks Consensus Estimate of $1.44.

Zacks Rank: Tech Data has a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.

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

Stock to Consider

Here are some stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Dollar Tree, Inc. (DLTR - Free Report) has an Earnings ESP of +4.11% and a Zacks Rank #2.

Smith & Wesson Holding Corp. has an Earnings ESP of +1.89% and a Zacks Rank #2.

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