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Arrow (ARW) Q2 Earnings and Revenues Beat Estimates, Up Y/Y

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Arrow Electronics Inc. (ARW - Free Report) reported healthy second-quarter 2018 results. Both the top and bottom lines beat the Zacks Consensus Estimate and improved on a year-over-year basis.

Arrow’s non-GAAP earnings of $2.20 per share outpaced the Zacks Consensus Estimate of $2.15. It also increased 23.6% from the year-ago quarter.

The company’s adjusted revenues were $7.39 billion, up 13% from the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $7.20 billion.

Arrow Electronics, Inc. Price, Consensus and EPS Surprise

 

Arrow Electronics, Inc. Price, Consensus and EPS Surprise | Arrow Electronics, Inc. Quote

Segmental Details

Revenues from Global Components increased 15.5% to $5.3 billion. Geographically, the segment’s revenues from the Americas increased 13% from the prior-year period and revenues from Asia climbed 19.4%. Global components contribution from Europe rose approximately 14.9% from the year-ago quarter.

Revenues from Global Enterprise Computing Solutions (ECS) came in at $4.02 billion, up 8.8% year over year. ECS revenues from the Americas were up 11.3% on a year-over-year basis while that from Europe increased 4.9%.

The Global Components segment gained from design activity, which grew approximately 20% this quarter.  In the Americas, demand from industrial manufacturing and manufacturing customers during the quarter remained high.

The growing adoption of subscription and as-a-service solution has created a healthy sales backlog, which will be helpful in the upcoming quarters.

The company’s focus on expanding engineering services to offer more complete solutions was reflected in its revenues.

The performance of Global ECS segment was backed by strong hardware demand.

Operating Metrics

Gross profit increased 13.2% from the previous year to $932.8 million. On a year-over-year basis, operating expenses increased 8.8% but as a percentage of revenues decreased 40 basis points.

Arrow’s non-GAAP operating income was up 18.9% to $317.9 million. Non-GAAP operating margin of 4.3% was up 22 basis points.

Balance Sheet and Cash Flow

Arrow exited the quarter with cash and cash equivalents of $330.5 million compared with $548.6 million in the previous quarter.

Long-term debt was $3.7 billion compared with $2.9 billion at the end of the previous quarter.

During the quarter, the company’s cash outflow from operations was nearly $410 million, owing to the additional working capital employed to feed revenue growth.

Guidance

For the third quarter of 2018, sales are expected between $7.15 billion and $7.55 billion.

Global components sales are projected in the range of $5.25-$5.45 billion. Global ECS sales are estimated to be $1.9-$2.1 billion.

The company projects non-GAAP earnings per share in the range of $2.09-$2.21. Settlement of a sales tax issue in one of the international entities within the Enterprise Computing Solutions segment is included in the guidance.

Zacks Rank and Other Stocks to Consider

Arrow currently carries a Zacks Rank #2 (Buy).

A few stocks worth considering in the broader Computer and Technology sector are Adobe (ADBE - Free Report) , Qualys, Inc. (QLYS - Free Report) and Verint (VRNT - Free Report) , each 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 for Adobe, Qualys and Verint is projected to be 16.20%, 8% and 10%, respectively.

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