Back to top

Analyst Blog

Avnet, Inc. (AVT - Analyst Report), a world-leading supplier of electronic components and computer products, recently came up with an acquisition agreement to purchase Universal Semiconductor, Inc. (USI Electronics). The acquisition is expected to close within 30 days of the announcement.

Based in Fort Lauderdale, Florida, USI Electronics is primarily engaged in supplying discrete semiconductor, passive and electromechanical machinery in the field of military and aerospace. The company’s revenue was nearly $70 million in 2011.

With the acquisition, the company’s operating unit Avnet Electronics Marketing, Americas, will be conflated with USI Electronics. While we await further details on the agreement, we assume that this latest acquisition would stimulate Avnet’s earnings stream moving ahead; and may even facilitate the company to achieve its return on capital (ROC) target of 12.5% in two years’ time.

Moreover, management expects that this acquisition will seamlessly strengthen Avnet’s foothold in the defense and aerospace market moving ahead. Avnet along with USI Electronics will be involved in augmenting its electronic components service offerings.

Avnet, on its part, has retained a keen eye for making profitable acquisitions for its market expansion and technological upgradation. During fiscal 2012, the company completed acquisitions of as many as eleven businesses with total annualized revenues of $900 million. These acquisitions are expected to enhance the company’s performances quite comprehensively and augment its product profile going forward.

Avnet’s domestic and foreign operations are subject to significant competitive pressures. It faces stiff competition from Arrow Electronics Inc. (ARW - Analyst Report), which remains a fiercely formidable rival. Arrow’s recent acquisition of ALTIMATE Group, Global Link Technology and Redemtech can turn out to be highly profitable, thereby posing a serious threat to the future of Avnet. In addition, big players to keep an eye out for in this regard include Anixter International Inc. (AXE - Snapshot Report), and Richardson Electronics Ltd. .

The current Zacks Consensus Estimates for Avnet are 83 cents and $3.13 for the second quarter of fiscal 2013 and for fiscal 2013, respectively. The estimates represent a year-over-year growth of (27.7%) for the second quarter and (22.9%) for fiscal 2013. The company currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We also maintain a long-term ‘Underperform’ recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
PLANAR SYST… PLNR 4.44 +5.21%
BITAUTO HOL… BITA 81.71 +5.12%
CTPARTNERS… CTP 16.66 +4.26%
CHINA BIOLO… CBPO 47.91 +3.30%
MALLINCKROD… MNK 72.94 +2.85%