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Will Tech Data's (TECD) Q4 Earnings Spring a Surprise?

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Tech Data Corp.  is set to release fourth-quarter fiscal 2017 results on Mar 8. Last quarter, the company posted a positive earnings surprise of 13.39%. It delivered positive surprises in three of the trailing four quarters, with an average beat of 7.90%.

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

Factors at Play                    

Tech Data is well positioned to achieve strong growth based on increasing demand for data center systems, cloud and mobility offerings in the long run. Higher level of spending in these areas is expected to drive revenue growth for Tech Data as the company consolidates its position in the fast-growing domain of data center, mobile technology, software and integrated supply chain.

Plus, Tech Data has a diversified customer base in both North America and Europe. In addition, the company continues to strengthen its position in the small and medium-business (SMB) customer segment in several countries, both organically and through acquisitions. 

Acquisitions have been an integral part of the company’s growth strategy.  Recently, the company completed the acquisition of the Technology Solutions unit from Avnet, Inc (AVT - Free Report) in a cash and stock deal worth $2.6 billion. The major benefit of this transaction will be Tech Data’s access to newer markets, i.e. in the Asia-Pacific region. The deal will expand Tech Data’s reach to 35 countries from the existing 21 countries.

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 fourth quarter of fiscal 2017, management expects revenues in a range of $7.4 billion to $7.6 billion. Tech Data projects non-GAAP earnings per share in a range of $2.11 to $2.21.

Earnings Whispers

Our proven model does not conclusively show that Tech Data is likely to beat earnings in the soon-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 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.18. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Tech Data’s Zacks Rank #1 when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks 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:

Sunrun Inc. (RUN - Free Report) with an Earnings ESP of +244.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Camping World Holdings, Inc. (CWH - Free Report) with an Earnings ESP of +22.22% and a Zacks Rank #2.

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