Avnet (AVT) Q1 Earnings: Will It Pull Off A Surprise?

Avnet Inc. (NYSE:AVT) is scheduled to report first-quarter fiscal 2017 results on Oct 27. Last quarter, the company posted a positive earnings surprise of 3.6%. Let's see how things are shaping up for this announcement.

Factors to Consider

Avnet posted better-than-expected results in the fourth quarter of fiscal 2016, wherein both the top and the bottom line beat the respective Zacks Consensus Estimate. However, both earnings and revenues declined on a year-over-year basis, primarily due to dull performance at the TS and EM business.

Avnet recently completed the much awaited acquisition of Premier Farnell plc in a total cash deal worth approximately £691 million. This is the company’s biggest ever acquisition deal. Avnet believes that the acquisition will strengthen its worldwide digital footprint.

We believe that the acquisition will not only increase Avnet’s revenues base but also strengthen the Electronics Marketing division’s offerings.

Furthermore, Avnet expects the transaction to be immediately accretive to its revenues and earnings both. Additionally, once fully integrated, the Premier Farnell business is projected to generate annual synergies of approximately $70 million to $80 million.

Note that a significant portion of Avnet’s revenues are derived from the sale of semiconductors – a cyclical industry characterized by changes in technology and manufacturing capacity, and subject to significant market upturns and downturns.

Nonetheless, Avnet’s leading position in electronics distribution, continuous cost cutting initiatives and acquisition synergies are encouraging. However, competition from Arrow Electronics Inc. (NYSE:ARW) and Ingram Micro remains a material headwind.

AVNET Price and EPS Surprise

Earnings Whispers?

Our proven model does not conclusively show that Avnet will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 89 cents per share. Hence, the difference is 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Avnet’s Zacks Rank #2 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Amazon.com, Inc. (NASDAQ:AMZN) with Earnings ESP of +10.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

HubSpot, Inc. (NYSE:HUBS) with Earnings ESP of +13.89% and a Zacks Rank #3

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