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Why Is Synnex (SNX) Down 9.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Synnex (SNX - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synnex due for a breakout? 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.
TD SYNNEX Q3 Earnings Top Estimates, Revenues Miss
TD SYNNEX reported mixed results for the third quarter of fiscal 2023, wherein the bottom line surpassed the Zacks Consensus Estimate, while the top line missed the same. The company reported third-quarter non-GAAP earnings of $2.78 per share, which topped the Zacks Consensus Estimate of $2.50 per share and increased 1.5% year over year.
A greater mix of higher-margin high-growth portfolio mainly drove the bottom line, partially offset by lower revenues and a $16 million headwind from higher interest expenses.
Revenues of $13.96 billion decreased 9.1% year over year and missed the consensus mark of $14.04 billion. On a constant-currency basis, second-quarter revenues decreased 10.2%.
The year-over-year decline in the top line was mainly due to the weak demand for the company’s Endpoint Solutions amid softness in PC demand post-pandemic. This was partially offset by increased sales across the Advanced Solutions portfolio and high-growth technologies, with demand driven by cloud, security and data analytics-related technologies.
Region-wise, although TD SYNNEX continues to witness strong demand for its technology products and services across the Asia-Pacific and Japan region (10.3% year-over-year growth), the remaining two regions, the Americas and Europe, witnessed a year-over-year decline of 10.3% and 9.7%, respectively.
Quarterly Details
The non-GAAP gross profit increased 3.4% year over year to $973.7 million. Meanwhile, the non-GAAP gross margin improved 84 basis points (bps) to 6.97%, mainly driven by a greater mix of the higher-margin high-growth portfolio.
In the reported quarter, the non-GAAP operating income was down 0.4% to $396.8 million, mainly due to higher SG&A expenses, which more than offset the benefits of the increased gross margin. Adjusted SG&A expenses increased to $576.9 million from the year-ago quarter’s $543.7 million.
The non-GAAP operating margin improved by 25 bps on a year-over-year basis to 2.84%, primarily driven by the higher gross margin, partially offset by increased SG&A expenses as a percentage of revenues. SG&A expenses as a percentage of revenues increased to 4.1% from 3.5% in the year-ago quarter.
TD SYNNEX ended the fiscal third quarter with cash and cash equivalents of $1.25 billion compared with $852.1 million witnessed at the end of the fiscal second quarter. During the reported quarter, SNX generated operating cash flow and free cash flow of $592 million and $552 million, respectively. In the first three quarters of fiscal 2023, the company generated operating and free cash flows of $1.2 billion and $1.09 billion, respectively.
TD SYNNEX returned $133 million to shareholders in the third quarter by repurchasing stocks worth $103 million and paying out $33 million in dividends. In the first nine months of the fiscal, the company returned $374 million to shareholders by repurchasing stocks worth $278 million and paying out $99 million in dividends.
SNX announced a quarterly cash dividend of 35 cents per share, payable on Oct 27, 2023, to the shareholders of record on Oct 13, 2023.
Guidance
TD SYNNEX issued dismal guidance for the fourth quarter of fiscal 2023. It expects to generate revenues between $14 billion and $15 billion for the fourth quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $15.12 billion.
The non-GAAP net income is estimated in the range of $223-$269 million. Moreover, TD SYNNEX projects non-GAAP earnings between $2.40 and $2.90 per share for the fourth quarter. The consensus mark for fourth-quarter non-GAAP earnings stands at $2.97 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -10.69% due to these changes.
VGM Scores
Currently, Synnex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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Why Is Synnex (SNX) Down 9.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Synnex (SNX - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synnex due for a breakout? 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.
TD SYNNEX Q3 Earnings Top Estimates, Revenues Miss
TD SYNNEX reported mixed results for the third quarter of fiscal 2023, wherein the bottom line surpassed the Zacks Consensus Estimate, while the top line missed the same. The company reported third-quarter non-GAAP earnings of $2.78 per share, which topped the Zacks Consensus Estimate of $2.50 per share and increased 1.5% year over year.
A greater mix of higher-margin high-growth portfolio mainly drove the bottom line, partially offset by lower revenues and a $16 million headwind from higher interest expenses.
Revenues of $13.96 billion decreased 9.1% year over year and missed the consensus mark of $14.04 billion. On a constant-currency basis, second-quarter revenues decreased 10.2%.
The year-over-year decline in the top line was mainly due to the weak demand for the company’s Endpoint Solutions amid softness in PC demand post-pandemic. This was partially offset by increased sales across the Advanced Solutions portfolio and high-growth technologies, with demand driven by cloud, security and data analytics-related technologies.
Region-wise, although TD SYNNEX continues to witness strong demand for its technology products and services across the Asia-Pacific and Japan region (10.3% year-over-year growth), the remaining two regions, the Americas and Europe, witnessed a year-over-year decline of 10.3% and 9.7%, respectively.
Quarterly Details
The non-GAAP gross profit increased 3.4% year over year to $973.7 million. Meanwhile, the non-GAAP gross margin improved 84 basis points (bps) to 6.97%, mainly driven by a greater mix of the higher-margin high-growth portfolio.
In the reported quarter, the non-GAAP operating income was down 0.4% to $396.8 million, mainly due to higher SG&A expenses, which more than offset the benefits of the increased gross margin. Adjusted SG&A expenses increased to $576.9 million from the year-ago quarter’s $543.7 million.
The non-GAAP operating margin improved by 25 bps on a year-over-year basis to 2.84%, primarily driven by the higher gross margin, partially offset by increased SG&A expenses as a percentage of revenues. SG&A expenses as a percentage of revenues increased to 4.1% from 3.5% in the year-ago quarter.
TD SYNNEX ended the fiscal third quarter with cash and cash equivalents of $1.25 billion compared with $852.1 million witnessed at the end of the fiscal second quarter. During the reported quarter, SNX generated operating cash flow and free cash flow of $592 million and $552 million, respectively. In the first three quarters of fiscal 2023, the company generated operating and free cash flows of $1.2 billion and $1.09 billion, respectively.
TD SYNNEX returned $133 million to shareholders in the third quarter by repurchasing stocks worth $103 million and paying out $33 million in dividends. In the first nine months of the fiscal, the company returned $374 million to shareholders by repurchasing stocks worth $278 million and paying out $99 million in dividends.
SNX announced a quarterly cash dividend of 35 cents per share, payable on Oct 27, 2023, to the shareholders of record on Oct 13, 2023.
Guidance
TD SYNNEX issued dismal guidance for the fourth quarter of fiscal 2023. It expects to generate revenues between $14 billion and $15 billion for the fourth quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $15.12 billion.
The non-GAAP net income is estimated in the range of $223-$269 million. Moreover, TD SYNNEX projects non-GAAP earnings between $2.40 and $2.90 per share for the fourth quarter. The consensus mark for fourth-quarter non-GAAP earnings stands at $2.97 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -10.69% due to these changes.
VGM Scores
Currently, Synnex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Synnex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.