Avnet Posts Flat Q2 Sales, EPS Up

Sales were described as "essentially flat" on a year-over-year basis at $6.7 billion. Adjusted operating income an adjusted operating margin both declined on a year-over-year basis, by 16.9 percent and 3.3 percent, respectively. Adjusted diluted earnings per share declined by 12.2 percent year-over-year but posted an increase of more than 71 percent when viewed sequentially. The uptick is believed to be driven by significant growth in technology solutions profits.

"Our overall Q2 results reflect a stronger than expected performance despite some continuing concerns on the longer term macroeconomic environment," said CEO Rick Hamada in a prepared statement. "Our team was able to leverage our recent resource alignment activities along with a few bright spots in technology spending into significant sequential improvements in EPS, margins and returns. In the December quarter, sequential growth returned to seasonal trends after below seasonal growth over the past two quarters as revenue exceeded expectations at both operating groups. Driven by stronger than expected calendar year end spending on IT infrastructure and accelerating growth in our Asia components business, revenue grew over 14 percent sequentially in reported dollars while pro forma revenue was up 9 percent in constant dollars."

[Related: The Best And Worst Channel Stocks Of 2012 ]

Also on the positive side of the ledger, adjusted operating income and operating income margin both increased by 60.5 percent and 95 basis points, respectively.

"Combined with the cost reductions implemented," Hamada said, "this top line growth resulted in sequential adjusted operating income growing four times faster than revenue and adjusted operating income margin increasing 95 basis points to 3.3 percent."

During the quarter, the Phoenix-based distributor made headlines for launching cloud bundles in conjunction with Amazon Web Services. Avnet more recently acquired TSSLink, a professional services firm. However, this latest announcement was made several days after the close of the second quarter, and thereby had no impact on the numbers for the reported quarter.

"While our performance this quarter attests to the leverage in our model, our served markets continue to reflect an uneven recovery as questions around global growth trends persist," added Hamada. "In this environment, we will continue to react quickly to changes in market conditions and apply our value based management discipline across the portfolio to drive continued progress toward our long-term goals."

The outlook for the third quarter calls for consolidated sales in the $6 billion range with adjusted diluted earnings per share between $.81 and $.91, according to the company.

Regarding the close of the second quarter, chief financial officer Kevin Moriarty added, "Overall, the team did an effective job of managing resources as a 6.3% decline in inventory, excluding the impact of acquisitions and foreign currency, contributed to a 5.4 day sequential reduction in the cash conversion cycle and a half turn improvement in working capital velocity. Through the first six months of the fiscal year, we have generated $407 million in cash from operations which, when combined with our strong balance sheet, provides ample liquidity to invest in profitable growth going forward."

PUBLISHED JAN. 24, 2013