Ingram Micro (IM) Beats Q2 Earnings & Revenue Estimates

Ingram Micro Inc. (NYSE:IM) reported second-quarter 2016 non-GAAP earnings (excluding amortization of intangible assets, reorganization charges and other one-time items) of 61 cents per share, which beat the Zacks Consensus Estimate of 49 cents. Also, earnings increased from 55 cents reported in the year-ago quarter.

Quarter Details

Though Ingram Micro’s second-quarter revenues of $10.123 billion beat the Zacks Consensus Estimate of $9.741 billion, it decreased 4.1% from the year-ago quarter. The year-over-year decrease was primarily due to the negative impact of foreign currency translation.

Geographically, revenues from North America, Europe, Latin America and Asia-Pacific came in at $4.43 billion, $2.78 billion, $650.9 million and $2.26 billion, respectively.

Ingram Micro’s gross margin was 7.1% compared with 6.2% in the year-ago quarter. The company’s non-GAAP operating expenses increased 11.2% year over year to $573.3 million. Also, as a percentage of revenues, expenses were up 77 basis points (bps), primarily due to higher selling, general and administrative expenses.

The company recorded a 4.5% increase in non-GAAP operating income to $157.1 million, primarily due to better mix of high value business. Operating margin also increased 12 bps year over year to 1.6%.

Ingram Micro reported non-GAAP net income of $92.1 million or 61 cents per share. Non-GAAP net income excludes the effect of intangible assets, reorganization charges and other one-time items.

Ingram Micro exited the second quarter with cash and cash equivalents of $878.9 million compared with $1.12 billion in the previous quarter. Accounts receivable were $5.13 billion. Total debt (including current portion) was $1.31 billion compared with $1.22 billion in the last quarter.

The company generated cash flow of approximately $29.3 million from operational activities during the quarter.

Conclusion

Ingram Micro reported better-than-expected second-quarter 2016 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate. However, revenues decreased on a year-over-year basis primarily due to foreign exchange fluctuations.

Nonetheless, the company’s focus on the high-margin market and strategic acquisitions to increase market share are encouraging.

Ingram Micro has been striking distribution deals with a number of original equipment manufacturers, thereby expanding its product portfolio. Additionally, Ingram Micro’s exposure in cloud computing products is expected to drive growth.

Going forward, we remain fairly optimistic about Ingram Micro’s strategic relationship with network giants such as Juniper Networks Inc. (NYSE:JNPR) and International Business Machines (NYSE:IBM) . The company’s growing exposure in the small and medium business (SMB) and improving profitability are encouraging. However, its significant European exposure and debt burden remain concerns.

Currently, Ingram Micro has a Zacks Rank #3 (Hold).

Investors may consider a better-ranked technology stock, Box, Inc. (NYSE:BOX) , carrying a Zacks Rank #1 (Strong Buy).