Arrow Electronics Inc. (ARW - Free Report) recently commenced an offering of senior unsecured notes worth $500 million. The offering carries an interest rate of 3.250%, with maturity due in 2024. The company expects the offering to be completed by Sep 8, 2017, upon the fulfilment of certain customary conditions.
Arrow Electronics filed for registration with the U.S. Securities and Exchange Commission. Book-running managers currently acting for this notes offering include Merrill Lynch, Pierce, Fenner & Smith Incorporated, along with certain other lenders.
The company’s share price movement has been much impressive since the beginning of this year. Year to date, its shares have gained 8.4%, while the industry incurred a loss of 8.5%.
Proceeds from the Offering
The raised amount will enable Arrow Electronics to pay back its notes scheduled in 2018 and carry an interest rate of 3%. The fund will help it to increase fund availability and invest in short-term interest-bearing accounts and securities.
The remaining net proceeds from the transaction will be used for general corporate purposes including acquisitions and repayment of debts.
Fundamentals Driving Growth
Arrow Electronics’ core strength in providing best-in-class services and easy-to-acquire technologies are anticipated to positively impact the top line in the long run. The company has secured significant market share through its broad portfolio of products and services, which include ArrowSphere, UC in the Cloud solutions, engineering design capabilities and remote infrastructure-management (Live Virtual Help Desk) services.
The company’s continuous efforts to maximize consumer satisfaction have resulted in original equipment manufacturers, contract manufacturers and commercial customers selecting Arrow’s distribution channels for marketing products.
Additionally, Arrow Electronics’ persistent acquisitions enable it to enter markets, diversify and broaden product portfolio along with maintaining its leading position, thereby significantly contributing to the revenue stream. Incremental sales from strategic acquisitions such as Computerlinks are anticipated to boost the top line.
It is worth mentioning that, Arrow Electronics exited second-quarter 2017 with $521.6 million in cash and cash equivalents compared with $419.9 million in the previous quarter. Long-term debt (including current portion) was $3.07 billion compared with $2.46 billion at the end of the previous quarter. During the quarter, the company had negative operating cash flow of $112.2 million. Further, it spent $54.8 million for share repurchases during the quarter.
In the stringent regulatory landscape, this offering is expected to enhance the company's balance sheet and support future growth. Additionally, it will also assist Arrow Electronics to bring down capital expenditures.
Zacks Rank & Key Picks
Currently, Arrow Electronics carries a Zacks Rank #3 (Hold).
Some top-ranked stocks worth considering are Applied Optoelectronics, Inc. (AAOI - Free Report) , Micron Technology, Inc. (MU - Free Report) and Broadridge Financial Solutions, Inc. (BR - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected EPS growth rate for Applied Optoelectronics, Micron and Broadridge are 17.5%, 10% and 10%, respectively.
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