Tech Data (TECD) Beats on Q3 Earnings & Revenues, Stock Up

Tech Data Corp. TECD reported third-quarter fiscal 2018 non-GAAP earnings of $2.00 per share and revenues of $9.14 billion, both easily beating the Zacks Consensus Estimate of $1.90 and $9.1 billion, respectively.

On a year-over-year basis, both the metrics registered an increase of 38.9% and 40.8%, respectively. Share prices were up nearly 5% in after-hours trading following the quarterly results.

This impressive performance is primarily attributed to a strong contribution from the recently acquired Technology Solutions business of Avnet. Tech Data's net sales also surged almost 37% on a constant-currency (CC) basis.

Tech Data Corporation Price, Consensus and EPS Surprise

Tech Data Corporation Price, Consensus and EPS Surprise | Tech Data Corporation Quote

Quarterly Details

Net sales from the Americas (43.8% of revenues) soared 53% to $4 billion. Sales from Europe (52.5%) grew 25% to $4.8 billion. Driven by the buyout of Technology Solutions, revenues from Asia Pacific came in at $297 million.

The company said that it was on track to achieve $50 million in the current fiscal from the Technology Solutions takeover. It will achieve another $50 million by the next fiscal year.

Gross margin expanded 89 basis points (bps) from the year-ago quarter to 5.8%, primarily owing to the addition of Technology Solutions.

Non-GAAP selling, general & administrative (SG&A) expenses as a percentage of revenues increased 65 bps to 4.27% in the reported quarter.

Non-GAAP operating margin expanded 24 bps to 1.49%. Segment wise, operating margin for Americas expanded 52 bps while for Europe, it was almost flat year over year.

Balance Sheet and Cash Flow

As of Oct 31, 2017, Tech Data had approximately $562.6 million in cash and cash equivalents compared with $2.13 billion as of Jan 31, 2017. In the quarter under review, cash generated by operations was $70 million.

Outlook

For fourth-quarter fiscal 2018, Tech Data forecasts net sales in the range of $10.25-$10.8 billion. Non-GAAP earnings are anticipated in the $3.35-$3.65 per share band.

The stock has also seen the Zacks Consensus Estimate for earnings of the same period being pegged at $3.54 per share on revenues of $10.5 billion.

Zacks Rank & Share Price Movement

Tech Data carries a Zacks Rank #3 (Hold). Shares of the company have outperformed the industry on a year-to-date basis. While the stock has returned 10.1%, the industry has rallied 8% during the period.

Key Picks

Better-ranked stocks in the broader technology sector include Groupon Inc GRPN, Activision Blizzard ATVI and HP Inc HPQ. While Groupon sports a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Groupon, Activision and HP is projected at 10%, 13.8% and 4.4%, respectively.

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