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Synnex (SNX) Up 7.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Synnex (SNX - Free Report) . Shares have added about 7.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Synnex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

TD SYNNEX Q2 Earnings Beat Estimates, Revenues Miss

TD SYNNEX reported mixed results for the second quarter of fiscal 2022, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. However, both the metrics marked strong growth on a year-over-year basis.

The company’s fiscal second-quarter non-GAAP earnings of $2.72 per share topped the Zacks Consensus Estimate by 4.2% and increased 30.1% year over year. Revenues jumped 160.7% year over year to $15.27 billion, mainly due to the inclusion of revenues from the last year’s merger of Tech Data Corporation. However, the top line fell short of the consensus mark of $15.34 billion.

TD SYNNEX was formerly known as SYNNEX Corporation, but the company changed its name after the acquisition of Tech Data Corporation on Sep 1, 2021.

The company continues to witness the strong demand for its technology products and services. In addition, a steady IT spending environment, backed by rapid digital transformations, was an upside. However, the prevailing industry-wide supply-chain constraints negatively impacted the top line.

Quarterly Details

The gross profit grew 190% year over year to $955.8 million, while the gross margin improved 70 basis points (bps) to 6.3%. Adjusted SG&A expenses jumped to $584.9 million from the year-ago quarter’s $159.2 million.

In the reported quarter, the non-GAAP operating income was up 134% to $398.3 million. However, the non-GAAP operating margin contracted 29 bps on a year-over-year basis to 2.61%.

TD SYNNEX ended the fiscal second quarter with cash and cash equivalents of $521.5 million compared with the $510.2 million witnessed at the end of the first quarter. During the fiscal second quarter, SNX generated $1.04 billion in cash from operational activities.

The company repurchased shares worth $29 million in the second quarter and $53 million in the first half of fiscal 2022.

Additionally, TD SYNNEX announced that its board of directors declared a quarterly cash dividend of 30 cents per share. The newly approved dividend will be payable on Jul 29 to shareholders of record as of Jul 15.

Guidance

TD SYNNEX reaffirmed its non-GAAP earnings guidance for fiscal 2022, despite assuming a 14-cent headwind from the further devaluation of the Euro against the US dollar. For the fiscal, the company continues to project non-GAAP earnings in the range of $11.15-$11.65 per share.

On its fourth-quarter fiscal 2021 earnings call, the company stated that it expects to return approximately 50% of its cash flow to shareholders in the form of dividends and share buybacks over the next two to three years.

SNX issued strong guidance for the third quarter. For the third quarter of fiscal 2022, it projects to generate revenues between $14.5 billion and $15.5 billion.

The non-GAAP net income is estimated in the range of $241-$279 million. Moreover, TD SYNNEX projects non-GAAP earnings between $2.50 and $2.90 per share for the third quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Synnex has a great 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 quintile 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synnex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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