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Analyst Blog

Tech Data Corp. (TECD - Free Report) is set to release third-quarter fiscal 2017 results on Nov 22. Last quarter, the company posted a negative earnings surprise of 1.39%. It delivered positive surprises in two of the trailing four quarters, with an average beat of 3.61%.

Let us see how things are shaping up for this announcement.

Factors at Play                    

Tech Data is well positioned to achieve strong growth based on increasing demand for data center systems, cloud and mobility offerings in the long run. The higher level of spending in these areas is expected to drive revenue growth for Tech Data as the company consolidates its position in the fast-growing domain of data center, mobile technology, software and integrated supply chain.

Plus, Tech Data has a diversified customer base in both North America and Europe. In addition, the company continues to strengthen its position in the small and medium-business (SMB) customer segment in several countries, both organically and through acquisitions. 

Acquisitions have been an integral part of the company’s growth strategy.  Recently, the company announced the acquisition of the Technology Solutions unit from Avnet, Inc (AVT - Free Report) in a cash and stock deal worth $2.6 billion. The major benefit of this transaction will be Tech Data’s access to newer markets, i.e. in the Asia-Pacific region. The deal will expand Tech Data’s reach to 35 countries from the existing 21 countries. The buyout will also strengthen Tech Data distribution capabilities in Europe and the Americas. 

However, its exit from businesses in less profitable regions, though a positive in the long run, will weigh on near-term results. Also, Tech Data’s business has been affected by sluggish demand owing to a slowdown in the PC market.

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. For the fiscal year, capex is expected to be $44 million.

Earnings Whispers

Our proven model does not conclusively show that Tech Data is likely to beat earnings in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Tech Data is-0.79%. This is because the Most Accurate estimate of $1.26 is below the Zacks Consensus Estimate of $1.27. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Tech Data has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

TECH DATA CORP Price and EPS Surprise

TECH DATA CORP Price and EPS Surprise | TECH DATA CORP Quote

Stock to Consider

Here are some stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

EVINE Live Inc. (EVLV - Free Report) with an Earnings ESP of +25.00% and a Zacks Rank #2.

Palo Alto Networks, Inc. (PANW - Free Report) with an Earnings ESP of +14.82% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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