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Can Tech Data (TECD) Spring a Surprise This Earnings Season?

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Tech Data Corp. (TECD - Free Report) is set to release second-quarter fiscal 2018 results on Aug 31. Last quarter, the company delivered a positive earnings surprise of 34.53%. It has reported positive surprises in three of the trailing four quarters, with an average beat of 14.73%.

Revenues increased 28.5% to $7.7 million in the last quarter, higher than the Zacks Consensus Estimate of $7.3 million.

For second-quarter fiscal 2018, Tech Data forecasts net sales in the range of $8.55-$8.80 billion. Non-GAAP earnings are anticipated to be in the range of $1.95-$2.08 per share.

We note that shares have outperformed the industry in the past one year. While the industry gained 38.2%, the stock has returned 47.3%.

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

Factors at Play 

We believe that 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 company’s efforts to diversify into new domains are significantly positive.

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

Acquisitions and strategic alliances have been an integral part of the company’s growth strategy. The company completed the acquisition of the Technology Solutions business from Avnet (AVT - Free Report) in February 2017. The combination looks promising, with Microsoft’s (MSFT - Free Report) Azure already added to its Cloud Marketplace.

But lower demand for legacy enterprise servers and storage might dampen growth. Nevertheless, growing corporate PC demand in North America is a positive.

However, its exit from businesses in less profitable regions, though a positive in the long run, will weigh on near-term results.

Earnings Whispers

Our proven model does not conclusively show that Tech Data is likely to beat earnings in the soon-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 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.04. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tech Data Corporation Price and EPS Surprise

 

Tech Data Corporation Price and EPS Surprise | Tech Data Corporation Quote

Zacks Rank: Tech Data’s Zacks Rank #3 when combined with an ESP of 0.00%, makes surprise prediction difficult.

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

Stock to Consider

Here is a stock you may want to consider as our model shows that this has the right combination of elements to post an earnings beat:

Adobe Systems Incorporated (ADBE - Free Report) has an Earnings ESP of +0.54% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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