Avnet's 2Q Misses Estimate

Avnet, Inc (AVT - Analyst Report) reported a net income of $147.0 million or $0.98 per diluted share in the second quarter of fiscal 2012 compared to a net income of $139.0 million or $0.90 per share in the first quarter of fiscal 2012 and a net income of $141.0 million or $0.91 in the year-ago quarter.

The net reported income missed the Zacks Consensus Estimate and also failed to fall within management’s guidance range of $1.01 - $1.09.

Quarter in Detail: Sales came in at $6,693.6 million, down 1.1% from a year-ago but up 4.2% sequentially. Pro forma revenue (excluding acquisitions/divestitures) declined 5% in constant currency at EMEA but rose 14% in Asia. Revenues were within management’s guidance range of $6.45 billion and $7.15 billion.

On a segmental basis, revenues from Electronics Marketing (EM) increased 1.0% from the year-ago quarter to $3.59 billion, within management’s guidance range of $3.45 billion - $3.75 billion.

Revenues from Technology Solutions (TS) fell 3.5% from the year-ago quarter to $3.09 billion; just falling within management’s guidance of $3.0 billion - $3.40 billion.

Margins: Gross margin increased to 11.7% from 11.4% in the year-ago quarter but was flat sequentially. Excluding restructuring, integration and other charges, adjusted operating margin was 3.4%, remaining the same as the year-ago quarter but dropping marginally from 3.5% sequentially.

EM operating margin came in at 4.86% from 5.15% in the year-ago quarter but down from 5.01% in the previous quarter. TS operating margins increased to 3.83% from 3.38% in the previous year quarter and 2.49% in the last quarter.

Cash flow/Balance Sheet: During the quarter, Avnet generated net cash of $450 million from operations and used $70.85 million in capital expenditures. Avnet ended the quarter with cash and cash equivalents of $968.5 million, up from $622.4 million at the end of the previous quarter.

During the quarter, Avnet repurchased 4.61 million shares for an aggregate cost of $135.1 million.

Guidance: For the third quarter of fiscal 2012, the company projects consolidated sales in the range of $5.95 billion and $6.55 billion. Avnet expects EM sales and TS sales to be in the range of $3.55 billion - $3.85 billion and $2.40 billion - $2.70 billion, respectively. Adjusted EPS is expected in the range of $0.94 - $1.02.

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