Avnet Inc. (AVT) is scheduled to announce its fourth quarter and fiscal 2011 results on Wednesday, August 10. The company has consistently exceeded expectations. On average, Avnet has beaten the Zacks Consensus Estimate by 11.48% in the last four quarters.
Avnet posted an adjusted net income (excluding the impact of restructuring, integration and other one-time items) of $1.10 per share compared with 76 cents per share in the year-earlier quarter. The results were ahead of management’s guidance range of $0.93-1.01 and the Zacks Consensus Estimate of $0.98.
Avnet revenues jumped 40% from the year-earlier quarter to $6.7 billion, surpassing management’s guidance range of $5.95-6.55 billion. The growth was primarily led by soaring sales from the Electronics Marketing segment.
Agreement of Estimate Revisions
Estimates for the fourth quarter and fiscal 2011 have been largely static. Out of a total of nine analysts covering the stock, one changed his/her estimate over the last seven days (in the downward direction) while others maintained their estimates.
The current Zacks Consensus Estimate for fiscal 2011 is $4.27, representing an estimated 54.07% year-over-year increase.
The magnitude of estimate revisions for the fourth quarter and fiscal 2011 was down by a penny in the prior week.
We believe the company makes a concerted effort to expand its geographical base by acquiring new companies, which will eventually drive Avnet’s long-term growth.
Recently, the company acquired J.C. Tally Trading Co. Ltd and its affiliate Shanghai FR International Trading in an endeavor to strengthen its position in Asia. The acquisitions of Bell Micro and Tallard will firmly establish Avnet as a leading value-added IT distributor in the fast-growing Latin American region.
We expect that Avnet’s success will be led by strong demand for semiconductor components and growth in the data center business.
Although the company has generated impressive revenue growth, the company’s margins continue to be a matter of concern. Avnet, however, has planned to divest the acquired businesses with lower margins to combat the pressure on margins.
We are also worried about the realization of synergies from acquisitions and the shift of business mix toward the low-margin Asian region. Thus, we have a long-term Neutral recommendation on Avnet.
In the short term, we have a Zacks #4 Rank (Sell rating).