Ingram Micro Inc. ( IM - Analyst Report ) reported first-quarter 2013 earnings per share of 41 cents, missing the Zacks Consensus Estimate of 43 cents. The results were 6.8% lower than 44 cents reported in the year-earlier quarter.

Revenues

Ingram Micro’s first quarter revenues of $10.3 billion increased 18.8% from $8.6 billion in the year-ago quarter and were slightly above the Zacks Consensus Estimate of $10.1 billion. Effect of currency translation was nominal. Geographical contributions were decent barring Europe. Apart from this, additional contributions from the Brightpoint and Aptec Holdings acquisitions were the quarter’s differentiators.

Revenue contribution from North America increased 7.2% year over year to $3.87 billion. The improvement can be attributed to strong performances in all the U.S. divisions (especially in advanced computing and specialty divisions), partially offset by a soft Canadian business. Europe, Middle East and Africa (EMEA) contributed $2.67 billion, up 0.8% from the year-ago quarter. Difficult macro environment and competitive pressures continued to count on European revenue contributions, though higher contribution from the small and medium business sector was a relief.

The Asia-Pacific region generated $2.19 billion in sales, up 12.6% from $1.95 billion in the year-ago quarter. The improvement was attributed to strong regional performances in India, China and Australia as well as strong contribution from Aptec Holdings. Latin America sales grew 7.0% year over year to $462.0 million.

Operating Results

Gross profit increased 25.2% from the year-ago quarter to $585.3 million. Gross margin was 5.7%, up from 5.4% in the year-ago quarter. The improvement was mainly attributable to solid performances in the mobility business, which was inherited from Brightpoint. This was partially offset by an adverse effect of a higher mix of lower margin products (such as tablets).

Selling, general and administrative expenses increased 31.7% year over year to $474.1 million. Operating margin of 0.9% dropped 30 basis points year over year.

Ingram Micro reported net income of $49.8 million or 32 cents per share, compared with $90.0 million or 44 cents in the year-ago quarter. Excluding certain pre-tax one-time items, adjusted net income was 41 cents per share compared with 43 cents in the year-ago quarter.

Balance Sheet and Share Repurchase

Ingram Micro exited the first quarter with cash and cash equivalents of $562.6 million, down from $595.1 million in the previous quarter. Accounts receivable decreased 17.4% sequentially to $4.51 billion. Inventories were $3.81 billion, up from $3.59 billion in the prior quarter. Total debt balance was $1.20 billion, up from $1.05 billion in the previous quarter.

Guidance

For the second quarter of 2013, the IT distributor expects revenues to be up 1.0%-4.0% sequentially. The company expects gross margin to be flat to slightly up sequentially. The company is positive on strong contribution from higher margin businesses, growth in emerging markets, synergies from acquired units and recovery in Australian market share.

The company seems very positive about BrightPoint. It expects the same to drive annual cost synergies of at least $55.0 million for 2014 and accretion to non-GAAP earnings per share of at least 34 cents in 2013 and 51 cents in 2014.

Conclusion

We find Ingram Micro’s first quarter results modest with the bottom line missing the Zacks Consensus Estimate and the top line beating the same marginally. The company has provided a cautious second quarter outlook. But we believe that the improving IT spending trend will help Ingram to post better results ahead. Moreover, management’s commentary of focusing more on the high-margin market and on strategic acquisitions to grow market share is encouraging.

The ongoing integration of BrightPoint seems to be pretty quick and the contribution is encouraging. Expected cost synergies and sizable contributions going forward could make BrightPoint a key driver for growth.

We remain fairly optimistic about Ingram Micro’s strategic relationship with network giant Juniper Networks Inc. ( JNPR - Analyst Report ) , as well as tech giants such as Hewlett-Packard Company ( HPQ - Analyst Report ) , IBM Corp. ( IBM - Analyst Report ) and Microsoft Corp.

However, the company’s significant European exposure and a high debt burden are concerns.

Currently, Ingram Micro has a Zacks Rank #3 (Hold).