It has been about a month since the last earnings report for Arrow Electronics (
ARW Quick Quote ARW - Free Report) . Shares have added about 0.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arrow Electronics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Arrow Q4 Earnings and Revenues Top Estimates
Arrow Electronics reported fourth-quarter 2020 adjusted earnings per share of $3.17, which beat the Zacks Consensus Estimate by 19.62%. Moreover, the bottom line increased 44.1% on a year-over-year basis.
Revenues came in at $8.45 billion, up 15% from the year-ago quarter. The top line also beat the consensus mark of $7.77 billion.
The company’s Global Components sales saw stellar growth in Asia, and improved growth in Europe. The company also continued to witness impressive demand for software, cloud and security solutions during the fourth quarter as firms needed to enable business continuity and remote working amid social distancing measures.
Adjusted revenues from Global Components increased 25% year over year to $5.92 billion. On an adjusted basis, revenues improved 23%. Region wise, the segment’s adjusted revenues from the Americas remained flat. Adjusted sales from Europe increased 7% year over year. Notably, Global Components’ contribution from the Asia Pacific increased 53% on an adjusted basis.
Adjusted revenues from Global Enterprise Computing Solutions (ECS) came in at $2.53 billion, down 5% year over year. Region wise, the segment’s adjusted revenues from the Americas slid 10%. Nonetheless, Global ECS’s contribution from Europe increased 2% on an adjusted basis.
Arrow’s non-GAAP gross profit grew 11.4% from the prior-year quarter to $923.65 million.
Operating income grew 18% to $335.87 million.
Balance Sheet and Cash Flow
Arrow exited the December quarter with cash and cash equivalents of $373.62 million compared with the previous quarter’s $227 million.
Long-term debt remained flat at $2.1 billion sequentially.
The company generated operating cash flow of $200 million during the fourth quarter and $1.36 billion in the full year of 2020.
In the fourth quarter, Arrow returned $100 million to shareholders through the stock-repurchase program. In the full year, it repurchased shares worth $475 million. Notably, the company reduced its debt by $715 million during the year.
In full-year 2020, Arrow recorded adjusted sales of $28.67 billion, down 1% year over year. Non-GAAP earnings of $7.75 per share increased 2.65%.
For the first quarter of 2021, sales are estimated between $7.63 billion and $8.23 billion.
Global Components sales are projected at $5.83-$6.13 billion. Global ECS sales are estimated to be $1.80-$2.10 billion.
Interest expenses will presumably be about $31 million. As a result, the company projects non-GAAP earnings per share at $2.17-$2.33.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 26.54% due to these changes.
Currently, Arrow Electronics has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arrow Electronics has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.