Shift To Higher-Margin Products Pushes Synnex Q1 Income Up


Synnex topped analysts' expectations for net income in the first fiscal quarter, but fell short of revenue projections for the same period and offered guidance lower than Wall Street is predicting.

The Fremont, Calif.-based distributor earned $38.2 million or $1.02 per diluted share on $2.46 billion in sales for the quarter ended Feb. 29. The numbers compare to profit of $29.7 million, or 80 cents per diluted share, on $2.50 billion in sales in the year-ago quarter. Analysts had projected earnings of 92 cents per share on $2.55 billion in revenue.

"We are pleased with our strong profitability in the fiscal first quarter and the overall stability in our core commercial IT distribution business," said Kevin Murai, president and CEO, in a statement.

Synnex's distribution business mix continued to shift towards higher margin, value-added products and services in the quarter, Murai said. "We also had a solid quarter for signing new contracts in our [Global Business Services] division. We expect these new business wins will ramp up in the coming quarters and are then expected to contribute to margin expansion in the GBS division."

Distribution sales were $2.42 billion in the quarter, down 1.8 percent compared to last year. The decline was explained by a transition of certain revenue to a fee for service logistics relationship, according to the company.

Global Business Services revenue increased 15 percent to $45.1 million.

For the current quarter, Synnex expects sales between $2.45 billion and $2.55 billion and earnings per share between 87 cents and 91 cents according to the company. The numbers are below Wall Street's consensus expectations of 95 cents per share and $2.60 billion in sales.

"We anticipate a stable demand environment with continued growth in year-over-year operating margin and earnings per share," Murai said in the statement.
Synnex shares closed at $43.64 Tuesday, down 25 cents or 0.6 percent.