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Avnet (AVT) Up 2.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Avnet (AVT - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Avnet 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 catalysts.
Avnet's Q2 Earnings and Revenues Surpass Estimates
Avnet reported better-than-expected second-quarter fiscal 2024 results. The company’s non-GAAP earnings were $1.40 per share, which surpassed the Zacks Consensus Estimate of $1.39. However, the reported figure came 30% lower than the year-ago quarter’s non-GAAP earnings of $2 per share, mainly due to lower revenues and the negative impact of 12 cents from higher interest expenses.
Revenues declined 7.6% year over year to $6.20 billion but slightly came ahead of the Zacks Consensus Estimate of $6.15 billion. The company’s top-line performance reflects a negative impact of weakened demand amid uncertain economic conditions and inventory correction measures adopted by customers.
During the second quarter, Avnet witnessed mixed demand across the diverse end markets it serves. The company pointed out that the defense and transportation markets continued to show relative strength, while demand in the industrial, consumer and communications verticals was relatively soft.
Quarterly Details
The Electronic Components segment’s revenues were down 8% year over year to $5.81 billion as inventory levels for certain components still remain elevated, which is delaying inventory replenishment requirements. Our estimates for the Electronic Components segment’s revenues were pegged at $5.74 billion.
The Farnell segment’s revenues decreased 4% to $393 million. Our estimates for the Farnell segment’s revenues were pegged at $409.2 million. The decrease in the Farnell segment was mainly due to softness in demand along with the negative impact of the product mix and competitive pricing pressure.
Avnet reported a sales decline across all geographical regions. Revenues from America, Asia and the EMEA fell 6%, 10% and 6% year over year, respectively.
Avnet reported a gross profit of $706.2 million, down from the year-ago quarter’s gross profit of $784.1 million. The gross margin contracted 29 basis points (bps) year over year to 11.4%, primarily due to the lower gross margin at Farnell. Farnell’s gross margin declined due to the negative impacts of an unfavorable sales mix and competitive pricing pressures. Electronic Components’ gross margin was flat on a year-over-year basis.
The adjusted operating income came in at $242 million, which decreased 19% year over year. Adjusted operating income for the Electronic Components segment declined 16% to $248 million, while that for Farnell’s plunged 57% to $16 million. Avnet’s adjusted operating margin shrink 57 bps to 3.9%. Electronic Components’ adjusted operating margin contracted 43 bps to 4.3%, while Farnell’s declined 504 bps to 4%.
Balance Sheet and Cash Flow
As of Dec 30, 2023, AVT had cash and cash equivalents of $272.9 million compared with $278.7 million reported at the end of the previous quarter.
The long-term debt was $2.75 billion as of Dec 30, down from $3.10 billion reported in the prior quarter. Avnet used cash worth $42 million for operational activities during the second quarter of 2024. In the first six months of fiscal 2024, it used cash worth $83.6 million for operational activities.
The company repurchased shares worth $59 million and paid $28 million in dividend payments to shareholders during the second quarter. In the first half of fiscal 2024, it repurchased shares worth $86 million and $56.1 million, respectively.
Third-Quarter Fiscal 2024 Guidance
Avnet estimates third-quarter fiscal 2024 revenues in the range of $5.55-$5.85 billion (midpoint $5.70 billion). Non-GAAP earnings for the current quarter are anticipated in the range of $1.05-$1.15 per share (midpoint $1.10).
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 -16.54% due to these changes.
VGM Scores
At this time, Avnet has a nice Growth Score of B, though it is lagging a bit 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Avnet has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Avnet (AVT) Up 2.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Avnet (AVT - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Avnet 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 catalysts.
Avnet's Q2 Earnings and Revenues Surpass Estimates
Avnet reported better-than-expected second-quarter fiscal 2024 results. The company’s non-GAAP earnings were $1.40 per share, which surpassed the Zacks Consensus Estimate of $1.39. However, the reported figure came 30% lower than the year-ago quarter’s non-GAAP earnings of $2 per share, mainly due to lower revenues and the negative impact of 12 cents from higher interest expenses.
Revenues declined 7.6% year over year to $6.20 billion but slightly came ahead of the Zacks Consensus Estimate of $6.15 billion. The company’s top-line performance reflects a negative impact of weakened demand amid uncertain economic conditions and inventory correction measures adopted by customers.
During the second quarter, Avnet witnessed mixed demand across the diverse end markets it serves. The company pointed out that the defense and transportation markets continued to show relative strength, while demand in the industrial, consumer and communications verticals was relatively soft.
Quarterly Details
The Electronic Components segment’s revenues were down 8% year over year to $5.81 billion as inventory levels for certain components still remain elevated, which is delaying inventory replenishment requirements. Our estimates for the Electronic Components segment’s revenues were pegged at $5.74 billion.
The Farnell segment’s revenues decreased 4% to $393 million. Our estimates for the Farnell segment’s revenues were pegged at $409.2 million. The decrease in the Farnell segment was mainly due to softness in demand along with the negative impact of the product mix and competitive pricing pressure.
Avnet reported a sales decline across all geographical regions. Revenues from America, Asia and the EMEA fell 6%, 10% and 6% year over year, respectively.
Avnet reported a gross profit of $706.2 million, down from the year-ago quarter’s gross profit of $784.1 million. The gross margin contracted 29 basis points (bps) year over year to 11.4%, primarily due to the lower gross margin at Farnell. Farnell’s gross margin declined due to the negative impacts of an unfavorable sales mix and competitive pricing pressures. Electronic Components’ gross margin was flat on a year-over-year basis.
The adjusted operating income came in at $242 million, which decreased 19% year over year. Adjusted operating income for the Electronic Components segment declined 16% to $248 million, while that for Farnell’s plunged 57% to $16 million. Avnet’s adjusted operating margin shrink 57 bps to 3.9%. Electronic Components’ adjusted operating margin contracted 43 bps to 4.3%, while Farnell’s declined 504 bps to 4%.
Balance Sheet and Cash Flow
As of Dec 30, 2023, AVT had cash and cash equivalents of $272.9 million compared with $278.7 million reported at the end of the previous quarter.
The long-term debt was $2.75 billion as of Dec 30, down from $3.10 billion reported in the prior quarter. Avnet used cash worth $42 million for operational activities during the second quarter of 2024. In the first six months of fiscal 2024, it used cash worth $83.6 million for operational activities.
The company repurchased shares worth $59 million and paid $28 million in dividend payments to shareholders during the second quarter. In the first half of fiscal 2024, it repurchased shares worth $86 million and $56.1 million, respectively.
Third-Quarter Fiscal 2024 Guidance
Avnet estimates third-quarter fiscal 2024 revenues in the range of $5.55-$5.85 billion (midpoint $5.70 billion). Non-GAAP earnings for the current quarter are anticipated in the range of $1.05-$1.15 per share (midpoint $1.10).
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 -16.54% due to these changes.
VGM Scores
At this time, Avnet has a nice Growth Score of B, though it is lagging a bit 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Avnet has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.