Avnet Upgrades Guidance

Avnet, Inc. (AVT - Analyst Report) recently upgraded its guidance for the second fiscal quarter mainly due to strength from its Electronics Marketing division. The company now expects sales to come between $4.325 and $4.725, up from the previous guidance of $4.10 billion to $4.70 billion.
 
Revenues from Electronics Marketing (EM) are expected to come between $2.375 billion and $2.475 billion, up from the previous estimated range of $2.15 billion to $2.45 billion. Revenues from Technology Solutions (TS) are projected between $1.95 billion and $2.25 billion, same as before. Billings in the month of December, which generally accounts for more than 50% of the quarter’s revenues, will be an important factor in determining the actual revenue from this division.
 
Earnings per share is estimated between 56 cents and 62 cents, up from the earlier estimate of EPS between 52 cents and 60 cents.

The company earlier reported revenues of $4.36 billion in the first quarter of fiscal 2010, down 3.1% year over year. Management stated that the impact of global slowdown led to the year-over-year decline, but the business environment is improving.

On a segment basis, Electronics Marketing sales came in at $2.44 billion, down 9.8% year over year. The rate of revenue decline moderated in the reported quarter and management is encouraged by the pace of bookings for this segment in recent months. Technology Solutions generated sales of $1.92 billion, up 6.9% year over year driven by growth in Americas and Europe, Middle East and Asia (EMEA).

Though the early signs of recovery improve business sentiments, IT spending is yet to pick up. The recovery is expected to be slow and steady and visibility is not clear - at least in the near term. Orders are yet to return to normal levels. The core business looks weak, and all the growth for Avnet seems to be coming from acquisitions in low margin Asian region.

Based in Phoenix, AZ, Avnet  is one of the world’s largest distributors of electronic components and computer products.

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