Avnet's Association with Congatec

Electronic parts distributor, Avnet Inc.’s ( AVT - Analyst Report ) business segment, Avnet Electronics Marketing Americas, recently entered into a distribution agreement with congatec, Inc. through its operating unit, Avnet Embedded. The company will be now engaged in providing a range of congatec’s computer-on-modules (COM) which includes Qseven, COM Express, XTX and ETX to its clients in Americas.

In addition, the company’s customers will also be able to access various types of applications in the field of medical, automotive, aerospace and transportation through a low energy, reduced cost and small form factor portals. Avnet shall also render various support services such as regulatory compliance, board support package services, performance testing solutions, prototype and first article builds to its clients. The contract is expected to broaden congatec’s coverage and product portfolio in the market of the Americas.

The company’s expansion plans comprising extension of the existing operations and adding new products to its product lines, particularly in the growing markets, are expected to boost its long-term potential. During the fourth quarter of fiscal 2012, revenues from Avnet’s Electronics Marketing (EM) segment declined 5.0% from the year-ago quarter to $3.76 billion, within management’s guidance range of $3.75 billion - $4.05 billion. However, we can still be optimistic about a better performance from this segment in the upcoming quarters. For the first quarter of fiscal 2013, the segment’s sales are likely to be within the range of $3.55 billion - $3.85 billion.

Avnet faces fierce competition from big players in the semiconductor industry. One of the stalwarts here is Arrow Electronics Inc. ( ARW - Analyst Report ) , which remains an immensely formidable rival, especially in the current times. In addition, there are several other big players such as Wesco International Inc. ( WCC - Analyst Report ) and Anixter International Inc. ( AXE - Snapshot Report ) in the industry.

The current Zacks Consensus Estimates for the first quarter of fiscal 2013 and for fiscal 2013 are 84 cents and $4.11, representing year-over-year growth of (6.79%) and 1.33%, respectively. The company currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. However, we are maintaining a long-term ‘Neutral’ recommendation on the stock.