Tech Data Corp. (NASDAQ:TECD) reported first-quarter fiscal 2018 non-GAAP earnings of $1.87 per share, comfortably beating the Zacks Consensus Estimate by 48 cents and jumped 78.1% from the year-ago quarter.
The massive growth was driven by robust top-line performance, which surged 28.5% to $7.66 billion, well ahead of the Zacks Consensus Estimate of $7.32 billion.
The year-over-year sales growth was primarily attributed to strong contribution ($1.6 billion for two months) from the recently acquired Avnet’s (NYSE:AVT) Technology Solutions business.
Excluding contribution from Technology Solutions, Tech Data's organic net sales increased almost 5% on a constant currency (CC) basis.
Shares were up 3.2% in pre-market trading. We note that the stock has outperformed the Zacks Retail Computer Hardware industry on a year-to-date basis. While the stock has returned 14.5%, the industry gained 12.3%.
Quarter Details
Net sales from the Americas (45.3% of revenues) surged 45.3% to $3.47 billion. Technology Solutions contributed $1.0 billion to net sales. Organically net sales increased approximately 5% at CC.
Net sales from the Europe (52.3%) increased 12.1% to more than $4.00 billion on a year-over-year basis. Technology Solutions contributed $500 million to net sales. Organically net sales increased approximately 5% at CC.
Net sales from the APAC were $188.3 million in the quarter.
Non-GAAP gross margin expanded 100 basis points (bps) from the year-ago quarter to 6%, primarily due to the addition of Technology Solutions.
Non-GAAP selling, general & administrative (SG&A) expense as a percentage of revenues increased 40 bps to 4.4% in the reported quarter.
Non-GAAP operating margin expanded 60 bps to 1.6%. Segment wise, Americas and Europe expanded 50 bps and 10 bps, respectively.
Balance Sheet and Cash Flow
As of Apr 30, 2017, Tech Data had approximately $861.5 million in cash and cash equivalents compared with $2.13 billion as of Jan 31, 2017. In the quarter, cash provided by operations was $224 million, significantly lower than $445 million generated in the previous quarter.
Outlook
For second-quarter fiscal 2017, Tech Data forecasts net sales in the range of $8.55–$8.80 billion. Non-GAAP earnings are anticipated to be in the range of $1.95–$2.08 per share.
The Zacks Consensus Estimate is currently pegged at $2.15 per share on revenues of $8.37 billion.
Zacks Rank & Key Picks
Currently, Tech Data carries a Zacks Rank #3 (Hold). Applied Optoelectronics (NASDAQ:AAOI) and TiVo (NASDAQ:TIVO) are two stocks worth watching in the broader sector. Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Applied Optoelectronics and TiVo is currently pegged at 20% and 10%, respectively.
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TiVo Corporation (TIVO): Free Stock Analysis Report
Applied Optoelectronics, Inc. (AAOI): Free Stock Analysis Report
Avnet, Inc. (AVT): Free Stock Analysis Report
Tech Data Corporation (TECD): Free Stock Analysis Report
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