Avnet, Inc. (AVT - Free Report) has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 7.7%.
With expected long-term earnings per share growth rate of 10.3% and a market cap of $4.7 billion, it seems to be a stock that investors should retain in their portfolio for now.
Let’s take a look at the factors aiding the company’s performance.
Strong performance of the Electronics Components segment and Premier Farnell buyout are aiding Avnet’s growth. The company’s enhanced portfolio and acquisition synergies are also positives, leading to a wide range of solutions and expansion of global operations.
Notably, the company’s restructuring activities are major tailwinds. The divestment of the TS division has allowed Avnet to focus on high-growth areas such as marketing electronic components and related products in the supply chain.
The company intends to use its resources to make investments in embedded solutions and critical digital platforms as well as expand its footprint in newer markets. The company has been trying to expand its presence in the IoT space via innovation and acquisitions.
Per a recent report by Forbes, the global IoT market is expected to reach $457 billion in 2020 from $157 billion in 2016 at a CAGR of 28.5%. We believe the company’s expanding presence in the IoT market is a positive as it will be able to tap the huge growth prospect in the space.
However, Avnet generates a significant portion of its revenues comes from the sale of semiconductors, which is a cyclical industry, characterized by changes in technology and manufacturing capacity and subject to significant market upturns and downturns. This makes us cautious about the company’s performance.
Additionally, increasing investments might be drag on near-term margins. Moreover, the divestment of the TS division will take considerable time to reflect on the bottom line of this Zacks Rank #3 (Hold) stock.
Stocks to Consider
Some better-ranked technology stocks include NVIDIA Corp. (NVDA - Free Report) , Western Digital Corp. (WDC - Free Report) and Micron Technology, Inc. (MU - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for NVIDIA, Western Digital and Micron is currently projected to be 10.25%, 19% and 10%, respectively.
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