Shares of Tech Data Corp. were down nearly 9% after the company reported dismal second-quarter fiscal 2017 results. Both non-GAAP earnings of $1.42 per share and revenues of $6.354 billion missed the respective Zacks Consensus Estimate of $1.44 and $6.613 billion. On a year-over-year basis, earnings and revenues were down nearly 1% and 3.4%, respectively.
On a constant currency basis, revenues were down 2% mainly due to pound devaluation following the Brexit mandate.
Management blamed an overall weaker-than-expected demand environment, as a result of product cycle, geo-political turmoil and intensifying competition, as the reason for the dismal performance.
Region wise, revenues from the Americas (42% of revenues) fell 3% to $2.7 billion, while the same from Europe (58%) was down 4% to $3.7 billion on a year-over-year basis.
The company’s gross profit in the quarter was $316.5 million, down 3% from the year-ago quarter.
Non-GAAP selling, general & administrative (SG&A) expenses were down 2% year over year to $238.4 million in the reported quarter. As a percentage of revenues, SG&A expenses were 3.75% compared with 3.71% in the year-ago quarter.
As a result, non-GAAP operating income fell 4% year over year to $78.1 million. Non-GAAP operating margin of 1.23% was flat year over year.
Geographically, non-GAAP operating income increased 3% in the Americas, and 4% year over year in Europe.
Balance Sheet and Cash Flow
At the end of the quarter, Tech Data had approximately $697.1 million in cash and cash equivalents compared with $531.2 million as of Jan 31, 2016. Total long-term debt was $349 million. In the quarter, cash used by operations was $91 million.
Outlook
For the third quarter of fiscal 2017, management expects revenues in a range of $6.25 billion to $6.45 billion (on a constant currency basis).Tech Data projects non-GAAP earnings per share in the range of $1.20 to $1.30.
The Zacks Consensus Estimate is pegged at $6.53 billion for revenues and $1.26 for earnings per share.
For the fiscal year, capex is expected to be $44 million
Our Take
Tech Data has been undertaking strategic initiatives to review and strengthen its operations including collaboration with new vendors and expansion of its product offerings. Additionally, the company has been focusing on developing its capabilities in integrated supply chain, value-added services, data center, cloud and consumer electronics and its cost-control measures.
However, its exit from businesses in less profitable regions, though a positive in the long run, will weigh on near-term results. Cautious IT spending outlook as well as a slowdown in the PC market is also a concern. The company may face headwinds because of significant dependence on a handful of customers including Apple (17% of sales in the quarter), HP Inc (14%) and Cisco (11%).
Currently, Tech Data has a Zacks Rank #4 (Sell). Some better-ranked stocks in the tech space include Asure Software, Inc. (ASUR - Free Report) , Ingram Micro Inc. , and GrubHub Inc. . While Asure Software sports a Zacks Rank #1 (Strong Buy), Ingram Micro and GrubHub carry a Zacks Rank #2 (Buy).
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Shares of Tech Data Corp. were down nearly 9% after the company reported dismal second-quarter fiscal 2017 results. Both non-GAAP earnings of $1.42 per share and revenues of $6.354 billion missed the respective Zacks Consensus Estimate of $1.44 and $6.613 billion. On a year-over-year basis, earnings and revenues were down nearly 1% and 3.4%, respectively.
On a constant currency basis, revenues were down 2% mainly due to pound devaluation following the Brexit mandate.
Management blamed an overall weaker-than-expected demand environment, as a result of product cycle, geo-political turmoil and intensifying competition, as the reason for the dismal performance.
Region wise, revenues from the Americas (42% of revenues) fell 3% to $2.7 billion, while the same from Europe (58%) was down 4% to $3.7 billion on a year-over-year basis.
The company’s gross profit in the quarter was $316.5 million, down 3% from the year-ago quarter.
Non-GAAP selling, general & administrative (SG&A) expenses were down 2% year over year to $238.4 million in the reported quarter. As a percentage of revenues, SG&A expenses were 3.75% compared with 3.71% in the year-ago quarter.
As a result, non-GAAP operating income fell 4% year over year to $78.1 million. Non-GAAP operating margin of 1.23% was flat year over year.
Geographically, non-GAAP operating income increased 3% in the Americas, and 4% year over year in Europe.
Balance Sheet and Cash Flow
At the end of the quarter, Tech Data had approximately $697.1 million in cash and cash equivalents compared with $531.2 million as of Jan 31, 2016. Total long-term debt was $349 million. In the quarter, cash used by operations was $91 million.
Outlook
For the third quarter of fiscal 2017, management expects revenues in a range of $6.25 billion to $6.45 billion (on a constant currency basis).Tech Data projects non-GAAP earnings per share in the range of $1.20 to $1.30.
The Zacks Consensus Estimate is pegged at $6.53 billion for revenues and $1.26 for earnings per share.
For the fiscal year, capex is expected to be $44 million
Our Take
Tech Data has been undertaking strategic initiatives to review and strengthen its operations including collaboration with new vendors and expansion of its product offerings. Additionally, the company has been focusing on developing its capabilities in integrated supply chain, value-added services, data center, cloud and consumer electronics and its cost-control measures.
However, its exit from businesses in less profitable regions, though a positive in the long run, will weigh on near-term results. Cautious IT spending outlook as well as a slowdown in the PC market is also a concern. The company may face headwinds because of significant dependence on a handful of customers including Apple (17% of sales in the quarter), HP Inc (14%) and Cisco (11%).
Currently, Tech Data has a Zacks Rank #4 (Sell). Some better-ranked stocks in the tech space include Asure Software, Inc. (ASUR - Free Report) , Ingram Micro Inc. , and GrubHub Inc. . While Asure Software sports a Zacks Rank #1 (Strong Buy), Ingram Micro and GrubHub carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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