Earnings Preview: Ingram Micro

Jul.29.09 | About: Ingram Micro (IM)

Ingram Micro (NYSE:IM) is expected to report Q2 earnings after the market close on Thursday, July 30, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 20c for EPS and $6.67B for revenue, according to First Call. On its last earnings call, Ingram Micro management said it sees FY09 sales negatively impacted. The company said it expects year-over-year sales comparisons to be negatively affected by the translation impact of relatively weaker foreign currencies as well as the timing of the Easter holidays, which occurred in the 1Q08 and in 2Q09.

Analyst Views

Goldman expects Ingram Micro’s Q2 revenue to be in line with or slightly above the Street estimate, vs. its estimate of $6.73B, down 0.3% quarter-over-quarter. The firm thinks EMEA -- Europe, the Middle East and Africa -- will likely see the sharpest fall off, both on a year-over-year and quarter-over-quarter basis, in the June quarter, owing to macro weakness, compounded by Ingram’s ongoing restructuring in its Nordic operations. Goldman estimates Ingram’s gross margin will remain flat year-over-year and be seasonally down 12 bp quarter-over-quarter to 5.53% in Q2. Competitive pricing in North America and EMEA should be partially offset by the benefits from higher unit volume. Expense reduction programs, with expected $100M - $120M in annualized savings by year-end, in addition to in-line to slightly better revenue and steady gross margin, should enable the company to show a couple of pennies of upside to Goldman's and the Street’s Q2 EPS estimate of 20c.

Looking forward: Goldman thinks Ingram Micro’s commentary on the IT spending outlook will remain cautious. Goldman estimates Q3 EPS of 23c vs. the Street’s 22c. For FY09, Goldman forecasts EPS of $1.15 vs. the Street’s $1.11.

Bottom line: Goldman thinks the risk/reward is balanced going into June-quarter earnings and the firm expects Ingram Micro shares to trade in line with the broader hardware group.