Ingram Micro (IM) Misses Q1 Earnings & Revenue Estimates

Ingram Micro Inc. (NYSE:IM) reported first-quarter 2016 non-GAAP earnings (excluding amortization of intangible assets, reorganization charges and other one-time items) of 35 cents per share, which missed the Zacks Consensus Estimate of 55 cents. Also, earnings decreased from 43 cents reported in the year-ago quarter.

Quarter Details

Ingram Micro’s first-quarter revenues of $9.337 billion missed the Zacks Consensus Estimate of $9.828 billion and decreased 12.3% 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 $3.88 billion, $2.66 billion, $599.8 million and $2.19 billion, respectively.

Ingram Micro’s gross margin came in at 6.8% compared with 5.8% in the year-ago quarter. The company’s non-GAAP operating expenses increased 9.9% year over year to $549.7 million. Also, as a percentage of revenues, expenses were up 119 basis points (bps), primarily due to higher selling, general and administrative expenses.

The company recorded a 19.2% decrease in non-GAAP operating income, which came in at $101.3 million, primarily due to significant foreign currency headwinds and higher operating expenses. Operating margin also decreased 10 bps year over year to 1.1%.

Ingram Micro reported non-GAAP net income of $52.6 million or 35 cents per share. Non-GAAP net income excludes the effect of intangible assets, reorganization charges and other one-time items.

Ingram Micro exited the first quarter with cash and cash equivalents of $1.12 billion compared with $935.3 million in the previous quarter. Accounts receivable were $4.69 billion. Total debt (including current portion) was $1.22 billion compared with $1.23 billion in the last quarter.

The company generated cash flow of approximately $274.6 million from operational activities during the quarter.

Conclusion

Ingram Micro reported lower-than-expected first-quarter 2016 results, with both the top and the bottom lines missing the Zacks Consensus Estimate. Moreover, both revenues and earnings 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 #4 (Sell).

Investors may consider a better-ranked technology stock, Facebook, Inc. (NASDAQ:FB) , carrying a Zacks Rank #1 (Strong Buy).