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Avnet's (AVT) Q3 Earnings & Revenues Beat Estimates, Fall Y/Y
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Avnet Inc. (AVT - Free Report) recently reported third-quarter fiscal 2020 results, wherein both top and bottom lines beat estimates.
Its non-GAAP earnings were 38 cents per share, surpassing the consensus mark by 31%. However, the metric plunged 65% year over year.
Revenues of $4.31 billion surpassed the Zacks Consensus Estimate by 7.2% but decreased 8.5% year over year. Nonetheless, the top line matched the midpoint of the company-guided range of $4.1-$4.5 billion.
Strong demand in the aerospace and defense market was a tailwind. However, weakness in automotive and industrial end markets was a concern.
Soft demand from Asia was a deterrent. Moreover, lower pricing and higher costs related to the impact of coronavirus on the company’s logistic operations affected the bottom line.
Electronic Components segment fell 8.2% year over year to $4 billion due to lower revenues in Asia as a result of the Chinese New Year and COVID-19.
Revenues from the Americas declined 7.2% year over year and that from the EMEA region was down 13.1%. Further, Asia revenues dropped 4% year over year.
Premier Farnell segment’s revenues of $335.1 million decreased 8.8% year over year.
During the quarter, Avnet expanded its partnership with Micron (MU - Free Report) . The company also inked a global distribution deal with Sequans Communications (SQNS - Free Report) for modem component Monarch Go to launch new IoT devices on Verizon with no additional testing, significantly reducing time to market. Moreover, Avnet also won ON Semiconductor’s (ON - Free Report) 2019 Distributor of the Year award.
Avnet also saw lower revenues from Texas Instruments as their 40-year distribution partnership ended in the first quarter of 2020.
Margins
Avnet reported gross profit of $518.9 million, down 16.9% year over year. Gross margin shrank 130 basis points (bps) to 12%, primarily due to lower revenues from Asia as well as global pricing pressures.
Adjusted operating income was $70.4 million, plunging 60.5% year over year. Adjusted operating margin came in at 1.6%, down 216 bps.
Adjusted operating expenses increased primarily due to a reserve for a potential bad debt from a customer.
However, focus on cost-reduction efforts was a boon.
Balance Sheet and Cash Flow
Avnet exited the fiscal second quarter with cash and cash equivalents of $402.7 million compared with $488.8 million in the previous quarter.
Long-term debt was $1.19 billion, flat sequentially.
The company returned $58 million to its shareholders in the form of $37 million from repurchased shares and $21 million worth of dividends.
Cash flow was $98 million in the quarter.
Guidance
Avnet is still in the process of assessing the potential impact of coronavirus on its business operations, financial performance and the results of operations in the fourth quarter. Therefore, the company refrained from providing a guidance for the fourth quarter of fiscal 2020.
Notably, Avnet expects to replace the Texas Instruments revenues with higher-margin revenues by the end of fiscal 2022.
The company currently carries a Zacks Rank #4 (Sell).
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Avnet's (AVT) Q3 Earnings & Revenues Beat Estimates, Fall Y/Y
Avnet Inc. (AVT - Free Report) recently reported third-quarter fiscal 2020 results, wherein both top and bottom lines beat estimates.
Its non-GAAP earnings were 38 cents per share, surpassing the consensus mark by 31%. However, the metric plunged 65% year over year.
Revenues of $4.31 billion surpassed the Zacks Consensus Estimate by 7.2% but decreased 8.5% year over year. Nonetheless, the top line matched the midpoint of the company-guided range of $4.1-$4.5 billion.
Strong demand in the aerospace and defense market was a tailwind. However, weakness in automotive and industrial end markets was a concern.
Soft demand from Asia was a deterrent. Moreover, lower pricing and higher costs related to the impact of coronavirus on the company’s logistic operations affected the bottom line.
Avnet, Inc. Price, Consensus and EPS Surprise
Avnet, Inc. price-consensus-eps-surprise-chart | Avnet, Inc. Quote
Quarter in Detail
Electronic Components segment fell 8.2% year over year to $4 billion due to lower revenues in Asia as a result of the Chinese New Year and COVID-19.
Revenues from the Americas declined 7.2% year over year and that from the EMEA region was down 13.1%. Further, Asia revenues dropped 4% year over year.
Premier Farnell segment’s revenues of $335.1 million decreased 8.8% year over year.
During the quarter, Avnet expanded its partnership with Micron (MU - Free Report) . The company also inked a global distribution deal with Sequans Communications (SQNS - Free Report) for modem component Monarch Go to launch new IoT devices on Verizon with no additional testing, significantly reducing time to market. Moreover, Avnet also won ON Semiconductor’s (ON - Free Report) 2019 Distributor of the Year award.
Avnet also saw lower revenues from Texas Instruments as their 40-year distribution partnership ended in the first quarter of 2020.
Margins
Avnet reported gross profit of $518.9 million, down 16.9% year over year. Gross margin shrank 130 basis points (bps) to 12%, primarily due to lower revenues from Asia as well as global pricing pressures.
Adjusted operating income was $70.4 million, plunging 60.5% year over year. Adjusted operating margin came in at 1.6%, down 216 bps.
Adjusted operating expenses increased primarily due to a reserve for a potential bad debt from a customer.
However, focus on cost-reduction efforts was a boon.
Balance Sheet and Cash Flow
Avnet exited the fiscal second quarter with cash and cash equivalents of $402.7 million compared with $488.8 million in the previous quarter.
Long-term debt was $1.19 billion, flat sequentially.
The company returned $58 million to its shareholders in the form of $37 million from repurchased shares and $21 million worth of dividends.
Cash flow was $98 million in the quarter.
Guidance
Avnet is still in the process of assessing the potential impact of coronavirus on its business operations, financial performance and the results of operations in the fourth quarter. Therefore, the company refrained from providing a guidance for the fourth quarter of fiscal 2020.
Notably, Avnet expects to replace the Texas Instruments revenues with higher-margin revenues by the end of fiscal 2022.
The company currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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