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Why Is Avnet (AVT) Up 14.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Avnet (AVT). Shares have added about 14.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Avnet due for a pullback? 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 drivers.

Avnet Q1 Earnings and Revenues Beat Estimates, Up Y/Y

Avnet reported better-than-expected first-quarter fiscal 2023 results and provided impressive guidance for the second quarter of fiscal 2023.

The company’s fiscal first-quarter non-GAAP earnings were $2 per share, which surpassed the Zacks Consensus Estimate of $1.91. The reported figure jumped 63.9% year over year.

Revenues climbed 20.9% year over year to $6.75 billion. On a constant-currency basis, fiscal first-quarter sales increased 28.9% year over year. The top line also beat the Zacks Consensus Estimate of $6.35 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.

Quarter Details

The Electronic Components segment’s revenues were up 23.3% year over year to $6.32 billion on stellar growth across all regions.

However, the Farnell segment’s revenues inched down 6.4% to $425.9 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 33.4% year over year. Sales from the EMEA and Asia regions jumped 21.9% and 14.1% year over year, respectively.

Avnet reported a gross profit of $768.2 million, up 16.4% year over year. The gross margin contracted 40 basis points (bps) to 11.4%.

The adjusted operating income came in at $293.3 million, soaring 64.1% year over year. The adjusted operating margin came in at 4.4%, up 115 bps.

Balance Sheet and Cash Flow

As of Oct 1, 2022, AVT had cash and cash equivalents of $80.9 million compared with the $153.7 million reported at the end of the previous quarter.
Long-term debt was $1.83 billion as of Oct 1, up from the $1.44 billion reported in the prior quarter. During the quarter, Avnet used cash worth $645.1 million for operational activities.

In the fiscal first quarter, the company repurchased shares worth $148 million and returned $27 million to shareholders through dividend payouts.

Second-Quarter Fiscal 2023 Guidance

Avnet estimates second-quarter fiscal 2023 revenues in the range of $6.35-$6.65 billion (midpoint $6.50 billion). Non-GAAP earnings for the current quarter are anticipated in the range of $1.80-$1.90 per share (midpoint $1.85).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Avnet has a subpar Growth Score of D, 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 20% 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.

Outlook

Estimates have been 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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