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Synnex (SNX) Q3 Earnings and Revenues Surpass Estimates

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Synnex Corporation (SNX - Free Report) reported non-GAAP earnings of $2.57 per share for fiscal third-quarter 2018, which increased 19% from the year-ago quarter and beat the Zacks Consensus Estimate of $2.45.

The company reported revenues of $4.907 billion in the quarter, reflecting a year-over-year increase of 14.7%. Revenues surpassed the Zacks Consensus Estimate of $4.889 billion. Management noted that foreign exchange had no material impact on consolidated revenue growth of the company. 

Quarter Details

Synnex’s Technology Solutions revenues were up 17% year over year to $4.4 billion driven by solid execution in core business and contribution from Westcon-Comstor.

The company witnessed growth across all product and services categories and major divisions of customer end markets, which include SMB, enterprise, consumer and the public sector. Geographically, growth was led by the United States along with solid performance from Latin America.

Concentrix revenues declined 1% from the prior-year quarter to $492 million. In order to improve the mix of business, the company is replacing lower margin services with higher value-added opportunities and improving its RPA and digital service offerings. This strategy of the company led to moderate growth in the top line but proved beneficial for the bottom line.

During the quarter, the company strengthened its position in key industries such as automotive, banking and insurance by partnering with leading companies. So far this year, the company has signed 59 new clients.

Synnex Corporation Price, Consensus and EPS Surprise

Synnex Corporation Price, Consensus and EPS Surprise | Synnex Corporation Quote

Margins

In the reported quarter, non-GAAP operating income increased 16% to $162.7 million. Non-GAAP operating margin expanded 5 basis points (bps) on a year-over-year basis to 3.32%. For the Technology Solutions and Concentrix segment, non-GAAP operating margin expanded 3 bps and 92 bps to 2.71% and 8.7%, respectively.

Balance Sheet and Other Details

Synnex ended the third quarter with cash and cash equivalents of nearly $204 million, down from $354.2 million as of the previous quarter. During the quarter, the company used $103 million cash in operational activities.

The company repurchased nearly 102K shares for around $10 million in the third quarter. At the end of the quarter, the company had $244 million remaining authorization under its three year share repurchase program of a total of $300 million.

Guidance

Synnex expects to close Convergys acquisition on Oct 5. The company issued fourth-quarter guidance considering the impact of the acquisition.

For the fiscal fourth quarter, Synnex expects revenue to be in the range of $5.2-$5.4 billion.  On a non-GAAP basis, earnings per share are expected to be in the range of $2.90- $3.10.

Management anticipates technology sector to remain healthy on the back of solid demand for the products and solutions. However, Hyve business revenues will be down on a year-over-year basis.

Revenues from Convergys are expected to be around $425 million with an adjusted operating margin of approximately 10%.

For fiscal 2019, the company expects non-GAAP earnings of $11.4 to $11.9 per share.

Zacks Rank and Stocks to Consider

Synnex currently has a Zacks Rank #4 (Sell)

A few better-ranked stocks in the broader technology sector are Aspen Technology (AZPN - Free Report) , Veeva Systems (VEEV - Free Report) and j2 Global (JCOM - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Aspen, Veeva and j2 Global is currently projected to be 16.5%, 19.3% and 8% respectively.

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