Avnet (AVT) Down 3.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Avnet (AVT). Shares have lost about 3.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Avnet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Avnet Beats Q2 Earnings & Revenue Estimates, Up Y/Y
Avnet reported better-than-expected second-quarter fiscal 2023 results and provided impressive guidance for the second quarter of fiscal 2023.
The company’s fiscal second-quarter non-GAAP earnings were $2 per share, which surpassed the Zacks Consensus Estimate of $1.83. The reported figure jumped 32.5% year over year.
Revenues climbed 14.5% year over year to $6.72 billion. On a constant-currency basis, fiscal second-quarter sales increased 21.1% year over year. The top line also beat the Zacks Consensus Estimate of $6.48 billion.
Avnet’s quarterly results benefited from a strong demand environment for its products and the company’s continued investments in e-commerce and expanding customer relationships. Robust sales in the Americas, the EMEA and Asia bolstered revenues in the reported quarter.
The Electronic Components segment’s revenues were up 16.3% year over year to $6.31 billion on stellar growth across all regions.
However, the Farnell segment’s revenues inched down 7.5% to $408 million. The segment’s revenues continue to get negatively impacted by currency fluctuations, specifically the weakening British pound and the ongoing shortage of components required to complete single-board computers.
Revenues from America increased 20.8% year over year. Sales from the EMEA and Asia regions jumped 22.6% and 5.6% year over year, respectively.
Avnet reported a gross profit of $784.1 million, up 10% year over year. The gross margin contracted 50 basis points (bps) to 11.7%.
The adjusted operating income came in at $300.5 million, rising 39.5% year over year. The adjusted operating margin came in at 4.5%, up 80 bps.
Balance Sheet and Cash Flow
As of Dec 31, 2022, AVT had cash and cash equivalents of $324.8 million compared with the $80.9 million reported at the end of the previous quarter.
Long-term debt was $3 billion as of Dec 31, up from the $1.83 billion reported in the prior quarter. During the quarter, Avnet used cash worth $321.4 million for operational activities.
In the fiscal second quarter, the company repurchased shares worth $64 million and returned $26 million to shareholders through dividend payouts.
Third-Quarter Fiscal 2023 Guidance
Avnet estimates third-quarter fiscal 2023 revenues in the range of $6.15-$6.45 billion (midpoint $6.30 billion). Non-GAAP earnings for the current quarter are anticipated in the range of $1.75-$1.85 per share (midpoint $1.80).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 11.91% due to these changes.
At this time, Avnet has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Avnet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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