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Why Is Tech Data (TECD) Down 4.8% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Tech Data Corporation (TECD - Free Report) . Shares have lost about 4.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is TECD due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Tech Data Beats Q1 Earnings & Revenues Estimates

Although first-quarter fiscal 2019 earnings of Tech Data deteriorated 1.6% on a year-over-year basis, investors were encouraged by a bottom-line beat after a miss in the preceding quarter. Further, sales surpassed the Zacks Consensus Estimate for the fifth straight quarter. On top of it, a solid second-quarter guidance buoys optimism.

A Brief Synopsis of Q1

Tech Data, reported first-quarter adjusted earnings of $1.84 per share, which not only exceeded its own expectation of $1.30-$1.60 but also surpassed the Zacks Consensus Estimate of $1.48. Notably, the company has exceeded the Zacks Consensus Estimate in five of the trailing seven quarters.

Revenues of $8,548 million increased 21.7% year over year and beat the consensus mark of $8,183 million, driven by favorable foreign currency exchange rates and an additional month of Technology Solutions' ("TS") sales.  Net sales rose 13% on a constant-currency basis.

The company generated 14% of sales in the quarter from Apple. HP Inc. and Cisco represented 12% and 11% of net sales, respectively.

For the fiscal second quarter, Tech Data forecasts net sales of $8.6-$8.9 billion compared with $8.9 billion reported in the second quarter of fiscal 2017.

Adjusted earnings per share are anticipated in the band of $1.95-$2.25 compared with $174 in the year-ago period.

Although, gross profit increased 14% to $523.1 million in the fiscal first quarter, gross margin contracted 39 basis points (bps) from the year-ago quarter to 6.1%. Adjusted operating margin contracted 30 bps to 1.5%.

The company exited the quarter with cash and cash equivalents of $346 million and long-term debt (less current maturities) of $1,505 million. Total shareholder’s equity was $2,868 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared with two lower.

Tech Data Corporation Price and Consensus

 

Tech Data Corporation Price and Consensus | Tech Data Corporation Quote

VGM Scores

At this time, TECD has a poor Growth Score of F and a grade with the same score on the momentum front. The stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, TECD has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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