The Best And Worst Channel Company Stocks In The Third Quarter Of 2017

Channel Stocks: Gainers And Losers

Stock markets have been on an upward trajectory in 2017 with few interruptions. For the third quarter the Dow Jones Index was up 4.94 percent while the Nasdaq was up 5.79 percent.

So how did publicly held solution providers and distributors fare? Gainers far outnumbered losers with 20 of the companies on our channel watch list recording stock price increases in the third quarter and only six seeing stock price declines – several by hefty double-digit percentages.

Here's a look at who was up and who was down in the third quarter of 2017, starting with companies with the biggest gains in share price, based on stock closing prices on June 30, 2017, and Sept. 29, 2017.

Systemax

CEO: Larry Reinhold

June 30, 2017: $18.80

Sept. 29, 2017: $26.43

Change: +40.59%

Systemax, No. 30 on the 2017 CRN Solution Provider 500, underwent some significant changes in 2016, including closing its retail business and eliminating as many as 500 jobs in an effort to cut costs. Those efforts are apparently paying off because the company's stock has been on the rise this year.

For its second quarter ended June 30, Systemax, based in Port Washington, N.Y., reported sales of $313.0 million, up 5 percent from $297.7 million in the second quarter of 2016. The company reported net income of $13.8 million compared with a $7.4 million loss one year before.

ePlus Technology

CEO: Mark Marron

June 30, 2017: $74.10

Sept. 29, 2017: $92.45

Change: +24.76%

On Feb. 2 ePlus Technology, No. 35 on the 2017 CRN Solution Provider 500, announced plans for a 2-for1 stock split effective April 3, and the ongoing stock prices have been adjusted accordingly.

On Aug. 18 the Herndon, Va.-based company said that its board had authorized a stock repurchase program to buy back up to 500,000 shares of common stock over a 12-month period. As of July 31, the company had approximately 14.2 million shares of common stock outstanding.

On Sept. 18 ePlus acquired the assets of Integrated Data Storage, a Midwest supplier of advanced data center solutions focused on cloud enablement and managed services, including its proprietary IDS Cloud service that supports private, hybrid and public cloud deployments.

Syntel

CEO: Rakesh Khanna

June 30, 2017: $16.96

Sept. 29, 2017: $19.65

Change: +15.86%

Syntel, No. 38 on the 2017 CRN Solution Provider 500, began 2017 under new management. On Oct. 31, 2016, Syntel president and CEO Nitin Rakesh stepped down after two and a half years in the position and was replaced on an interim basis by Rakesh Khanna, the solution provider's chief operating officer. Khanna was named permanent president and CEO on July 18.

For its second quarter ended June 30, Syntel, based in Troy, Mich., reported revenue of $226.8 million, down 8 percent from $246.0 million in last year's second quarter. Net income for the second quarter was $36.7 million, down nearly 38 percent from $58.8 million one year before.

Insight Enterprises

CEO: Kenneth Lamneck

June 30, 2017: $39.99

Sept. 29, 2017: $45.92

Change: +14.83%

On Jan. 6 Insight Enterprises, a major Microsoft and Cisco channel partner based in Tempe, Ariz., completed its $258 million acquisition of Datalink, one of the channel's biggest pure-play data center solution providers and No. 45 on the 2016 CRN Solution Provider 500. Insight, No. 13 on the 2017 CRN Solution Provider 500, said the acquisition strengthened its competitive position, through global scale and technical talent, in delivering on-premise and cloud data center solutions.

For its second quarter ended June 30, Insight reported sales of $1.68 billion, up 16 percent from $1.46 billion in the same quarter in 2016. Net earnings for the quarter were up 15 percent year over year to $40.3 million from $35.1 million one year earlier.

DXC Technology

CEO: Mike Lawrie

June 30, 2017: $76.72

Sept. 29, 2017: $85.88

Change: +11.94%

April 3 marked the launch of DXC Technology, a $26 billion IT infrastructure, services and solutions company created from the merger of CSC and HPE's Enterprise Services operations. Trading of DXC Technology stock began that day and trading of CSC shares ended.

On July 5 DXC, No. 11 on the 2017 CRN Solution Provider 500, announced that it had acquired Tribridge, a solution provider that works with Microsoft's Dynamics 365 cloud applications. DXC, based in Tysons Corner, Va., said the acquisition solidified its position as a Dynamics 365 systems integrator.

On Oct. 10, after the time period covered in this analysis, DXC acquired Logicalis SMC, a Netherlands-based solutions provider for the service management sector. DXC said the acquisition would expand its position as a ServiceNow integration partner.

CACI International

CEO: Kenneth Asbury

June 30, 2017: $125.05

Sept. 29, 2017: $139.35

Change: +11.44%

On Sept. 14 CACI, a supplier of IT solutions and services to national defense, intelligence and civilian government agencies, said it had been awarded a $173 million task order to supply modeling and simulation sensor development support to the U.S. Army.

For its fourth quarter ended June 30, CACI reported that revenue was $1.14 billion, up 2.1 percent from $1.11 billion in the same quarter one year earlier. Net income was $44.4 million, up 1.4 percent from $43.6 million one year before.

For all of fiscal 2017 ended June 30, CACI, based in Arlington, Va., reported revenue of $4.35 billion, up 16.3 percent from $3.74 billion in fiscal 2016. Net income for the year was $163.7 million, up 13.4 percent from $142.8 million one year before.

Cognizant Technology Solutions

CEO: Francisco D'Souza

June 30, 2017: $66.40

Sept. 29, 2017: $72.54

Change: +9.25%

In February Cognizant, No. 7 on the 2017 CRN Solution Provider 500, reached an agreement with activist investor Elliott Management under which the solution provider promised to appoint three new directors to its board and create a three-person financial policy committee to assist and advise the board on issues relating to the company's operating plan and capital allocation policy. The agreement came after Elliott Management had put pressure on Cognizant to improve shareholder value.

The company also promised to invest more in new technology practices, target non-GAAP operating margins of 22 percent by 2019, and return $3.4 billion to shareholders in the next two years through share repurchases and dividends.

For the six months ended June 30, Cognizant reported revenue of $7.22 billion, up 9.8 percent from $6.57 billion in the first half of 2016. Net income for the six months was $1.03 billion, up 48 percent from $693 million in the first half of last year.

On Aug. 28 Cognizant, based in Teaneck, N.J., completed its acquisition of TMG Health, solidifying its position as a leading service provider for government-managed health-care programs in the U.S.

Accenture

CEO: Pierre Nanterme

June 30, 2017: $123.68

Sept. 29, 2017: $135.07

Change: +9.21%

Accenture, No. 2 on the 2017 CRN Solution Provider 500, has acquired a steady stream of small companies in recent years, both to enhance its service offerings and to expand into new technology areas and vertical industries.

On Aug. 10 the Dublin, Ireland-based company said it had acquired Wire Stone, a 200-person marketing agency whose strategy, design and technology expertise would expand Accenture's offerings in the area of digital customer experiences. On Sept. 6 Accenture bought Matter, a company that designs products and user experiences for the connected world, to add to Accenture Interactive's Fjord design and innovation unit. And on the same day Accenture struck a deal to acquire IBB Consulting, a 160-person company that helps telecommunications and media companies adapt to next-generation digital and mobile technology. (That acquisition closed Oct. 9.)

For its fiscal 2017 ended Aug. 31, Accenture reported revenue of $36.77 billion, up 5.7 percent from $34.80 billion in fiscal 2016. But net income for fiscal 2017 was $3.63 billion, down more than 16 percent from $4.35 billion in fiscal 2016.

ScanSource

CEO: Mike Baur

June 30, 2017: $40.30

Sept. 29, 2017: $43.65

Change: +8.31%

On June 29 ScanSource announced a deal to acquire POS Portal, a provider of point-of-sale devices and services for small and midsize businesses, for $110 million.

On Aug. 29 ScanSource reported that sales in its fiscal 2017 fourth quarter (ended June 30) were $917.3 million, up 5 percent from $877.5 million in the same quarter one year earlier. Net income for the fourth quarter was $19.0 million, up 47 percent from $12.9 million one year before.

For all of fiscal 2017 ScanSource, based in Greenville, S.C., reported revenue of $3.57 billion, up 1 percent from $3.54 billion in fiscal 2016. Net income for the year was $69.2 million, up 9 percent from $63.6 million in fiscal 2016.

ManTech International

CEO: George Pedersen

June 30, 2017: $41.38

Sept. 29, 2017: $44.15

Change: +6.69%

On Sept. 18 ManTech International struck a deal to acquire InfoZen, a leading IT solution provider with expertise in IT modernization, Agile/DevOps software development, cloud migration, and threat monitoring and assessment in support of critical national and homeland security. ManTech, based in Fairfax, Va., said the acquisition, for $180 million in cash, would expand its presence in federal civilian agencies and add to its IT modernization and managed cloud services capabilities. The acquisition closed Oct. 2.

For the first six months of 2017, ManTech International, No. 31 on the 2017 CRN Solution Provider 500, reported revenue of $832.1 million, up 5 percent from $792.0 million in the first half of 2016. Net income for the period was $30.6 million, up more than 9 percent from $28.0 million in the first half of last year.

The company will report its third-quarter results on Nov. 1.

CDW

CEO: Thomas Richards

June 30, 2017: $62.53

Sept. 29, 2017: $66.00

Change: +5.55%

On Aug. 3 CDW's board of directors authorized a $750 million increase in the company's common stock share repurchase program. The $750 million is in addition to the $283 million in the repurchase program that was unused as of June 30. The company also announced a $0.16 per share dividend.

For its second quarter ended June 30, CDW, based in Vernon Hills, Ill., reported sales of $3.99 billion, up 9 percent from $3.66 billion in the same quarter one year earlier. Net income for the quarter was $141.0 million, up 20 percent from $117.5 million one year before.

Perficient

CEO: Jeffrey Davis

June 30, 2017: $18.64

Sept. 29, 2017: $19.67

Change: +5.53%

In June Perficient, No. 57 on the 2017 CRN Solution Provider 500, acquired Clarity, a Chicago-based software consultancy with annual revenue of $27 million and 160 employees. The move grew the solution provider's cloud and custom application development practices, and more specifically expanded its systems integration and software development services in the Microsoft market.

For the first six months of 2017 (ended June 30), St. Louis-based Perficient reported revenue of $228.0 million, down 8.1percent from $248.2 million in the first half of 2016. Net income for the first half of the year was $5.1 million, down 54 percent from $11.2 million in the first half of last year.

The company will report its third-quarter results on Nov. 2.

Synnex

CEO: Kevin Murai

June 30, 2017: $119.96

Sept. 29, 2017: $126.51

Change: +5.46%

On Sept. 1 Synnex completed its acquisition of Westcon-Comstor's $2.18 billion North American and Latin American businesses as part of an $830 million deal that also included a stake in Westcon-Comstor's $2.35 billion international business and an option to acquire an additional stake in that business. The acquisition provides Synnex with a way to enter the market for Cisco's products.

On July 31 Synnex's Concentrix subsidiary completed its acquisition of Tigerspike, a global digital products company specializing in strategy, experience design, development and systems integration.

For its fiscal 2017 third quarter (ended Aug. 31), Synnex, based in Fremont, Calif., reported revenue of $4.28 billion, up 16.5 percent from $3.67 billion in the same period one year ago. Net income for the quarter grew 28 percent to $75.2 million from $58.7 million one year ago.

SS&C Technologies

CEO: William Stone

June 30, 2017: $38.41

Sept. 29, 2017: $40.15

Change: +4.53%

SS&C, No. 33 on the 2017 CRN Solution Provider 500, reported that revenue in its second quarter ended June 30 reached $411.0 million, up more than 10 percent from $373.1 million in the same quarter one year earlier. Net income for the quarter was $51.2 million, up more than 81 percent from $28.2 million one year before.

SS&C, based in Windsor, Conn., will report its third-quarter results on Oct. 25.

Connection

CEO: Timothy McGrath

June 30, 2017: $27.06

Sept. 29, 2017: $28.19

Change: +4.18%

Connection, No. 22 on the 2017 CRN Solution Provider 500, reported sales of $749.8 million in its second quarter ended June 30, up 11 percent from $676.2 million in the same quarter one year earlier. Net income for the quarter was $13.6 million, up 9 percent from $12.5 million in the same quarter one year before.

Merrimack, N.H.-based PC Connection changed its name to "Connection" in 2016 to better reflect its IT offerings, from data center and networking, to software and security.

Arrow Electronics

CEO: Michael Long

June 30, 2017: $78.42

Sept. 29, 2017: $80.41

Change: +2.54%

For the first six months of 2017 (ended July 1), distributor Arrow Electronics, based in Centennial, Colo., reported sales of $12.22 billion, up 6.8 percent from $11.45 billion in the first half of 2016. Net income for the period was $213.4 million, down more than 11 percent from $240.5 million in the first half of 2016.

CSRA

CEO: Larry Prior

June 30, 2017: $31.75

Sept. 29, 2017: $32.27

Change: +1.64%

CSRA is the government IT services company formed in late 2015 through the combination of SRA International and the federal government business of Computer Sciences Corp. Based in Falls Church, Va., CSRA is No. 14 on the 2017 CRN Solution Provider 500.

On July 5 CSRA completed its acquisition of NES Associates, a provider of IT services to the U.S. military and federal government agencies. NES brings to CSRA its expertise in enterprise networking, cybersecurity, infrastructure and application architecture. The acquisition was CSRA's first as a public company.

On Aug. 9 CSRA said that revenue in its fiscal 2018 first quarter (ended June 30) was $1.23 billion, down 2 percent from $1.25 billion in the first quarter of fiscal 2017. But net income in the quarter rose more than 18 percent to $77 million from $65 million one year before.

CGI Group

CEO: George Schindler

June 30, 2017: $51.07

Sept. 29, 2017: $51.87

Change: +1.57%

On Aug. 23 Montreal-based CGI said it had acquired Pittsburgh-based Summa Technologies, a high-end IT consultancy with expertise in digital experience and Agile software development, in an all-cash transaction.

On Sept. 19 CGI, No. 19 on the 2017 CRN Solution Provider 500, said it would repurchase for cancellation 4.85 million shares of Class A subordinate voting shares from Caisse de depot et placement du Quebec at $61.80 per share. After the purchase la Caisse will still own 46.2 million shares, approximately 16 percent of CGI's outstanding shares.

For its fiscal 2017 third quarter (ended June 30), CGI reported revenue of CA$2.84 billion (U.S. $2.24 billion), up 6.4 percent from CA$2.67 billion (U.S. $2.10 billion) from the same quarter one year earlier. Net earnings for the quarter were CA$276.6 million (U.S. $218.1 million), up 1 percent from CA$273.8 million (U.S. $215.9 million) one year before.

Avnet

CEO: William Amelio

June 30, 2017: $38.88

Sept. 29, 2017: $39.30

Change: +1.08%

Avnet completed the $2.6 billion sale of its Avnet Technology Solutions business to distributor Tech Data on Feb. 27 in a deal that is reshaping the value-added distribution industry. The deal to sell the $9.65 billion TS business was announced in September 2016.

On Aug. 9 Kevin Moriarty, Avnet's chief financial officer for more than four years, said he would step down from the position on Aug. 18 for personal reasons. Ken Jacobson, Avnet's controller, was named interim CFO.

Also on Aug. 9 Phoenix-based Avnet announced financial results for its fourth quarter and fiscal 2017 (both ended July 1). For the quarter Avnet reported sales of $4.61 billion, up 16 percent from $3.97 billion in the fourth quarter of fiscal 2016. Net income for the quarter was $81.4 million, down nearly 16 percent from $96.8 million one year before.

For all of fiscal 2017 the distributor reported sales of $17.44 billion, up more than 4 percent from $16.74 billion in fiscal 2016. Net income for fiscal 2017 was $525.3 million, up 3.7 percent from $506.5 million one year before.

West Corp.

CEO: Tom Barker

June 30, 2017: $23.32

Sept. 29, 2017: $23.47

Change: +0.64%

On May 9 telecom service provider West Corp., No. 24 on the 2017 CRN Solution Provider 500, announced a deal to be acquired by private equity giant Apollo Global Management – the largest IT industry acquisition in the first half of 2017. Apollo paid $23.50 per share for West Corp. and assumed more than $3 billion of the company's debt, putting the total value of the deal at approximately $5.1 billion.

The acquisition was completed on Oct. 10, after the period covered in this analysis, and trading of the Omaha-based company's shares ended that day at $23.50 a share.

Presidio

CEO: Bob Cagnazzi

June 30, 2017: $14.31

Sept. 29, 2017: $14.15

Change: -1.19%

Presidio is the first company on our watch list to record a decline in its stock price in the third quarter.

Solution provider powerhouse Presidio, No. 21 on the 2017 CRN Solution Provider 500, went public on March 10, selling 16.7 million shares on the Nasdaq exchange and raising $233 million. The company planned to use the funds to pay down the company's roughly $1 billion debt and strengthen its balance sheet.

On Sept. 21 Presidio reported that in its fiscal 2017 fourth quarter (ended June 30), revenue was $729.3 million, down 3.3 percent from $753.9 million in the fourth quarter of fiscal 2016. The company reported net income of $10.4 million compared with a $7.4 million loss in the quarter one year before.

For all of fiscal 2017, New York-based Presidio reported revenue of $2.82 billion, up 3.8 percent from $2.71 billion in fiscal 2016. Net income in fiscal 2017 reached $4.4 million compared with a $3.4 million loss in fiscal 2016.

Conduent

CEO: Ashok Vemuri

June 30, 2017: $15.94

Sept. 29, 2017: $15.67

Change: -1.69%

Conduent is the $6.4 billion business process outsource service provider created when Xerox was split into two companies at the beginning of 2017. The company's shares began trading Jan. 3.

In August Conduent, based in Florham Park, N.J., reported that revenue in its second quarter ended June 30 was $1.50 billion, down more than 7 percent from $1.61 billion in the second quarter of 2016. The company reported a loss of $4 million compared with a $10 million loss in the same quarter one year before.

The company also issued guidance that it expects revenue for all of 2017 to be between 4.5 percent and 6.5 percent below the $6.41 billion in revenue in 2016.

Tech Data

CEO: Robert Dutkowsky

June 30, 2017: $101.00

Sept. 29, 2017: $88.85

Change: -12.03%

On Feb. 27 distributor Tech Data closed its $2.6 billion acquisition of Avnet's Technology Solutions business, announced in September 2016, in a deal that reshapes the value-added distribution landscape. Acquiring Avnet's $9.65 billion Technology Solutions business is expected to boost Tech Data's data center business, growing that operation's share of Tech Data's total revenue from 29 percent to 45 percent.

On Aug. 31 the Clearwater, Fla.-based company disclosed that weaker-than-expected sales of data center products caused the distributor to miss out on back-end rebates from several large vendors, contributing to lower-than-expected earnings in the second quarter. That led to a significant decline in the company's stock price in after-hours trading.

For the fiscal 2018 second quarter (ended July 31) Tech Data reported sales of $8.88 billion, up nearly 40 percent from $6.35 billion in the second quarter of fiscal 2017. Net income in the quarter was $47.5 million, up 2.3 percent from $46.4 million one year before.

PCM

CEO: Frank Khulusi

June 30, 2017: $18.75

Sept. 29, 2017: $14

Change: -25.33%

PCM's stock price took a hit (down nearly 17 percent) in the first half of 2017 after the company disclosed that En Pointe, whose IT solutions business PCM acquired in 2015 for $15 million and other considerations, had allegedly overstated the profitability of its business and that breaches by an En Pointe subsidiary had damaged PCM's goodwill with customers.

The stock price decline accelerated in the third quarter.

In a lawsuit filed in April PCM, No. 25 on the 2017 CRN Solution Provider 500, said damages from the En Pointe problems exceed $57 million – more than triple the company's 2016 net income.

PCM, headquartered in El Segundo, Calif., reported sales of $1.08 billion in the first six months of 2017 (ended June 30), up less than one percent compared to sales in the first half of 2016. But net income for the six months was down 13.7 percent year over year to $6.5 million from $7.6 million last year.

On Aug. 9 the company's board increased the company's share repurchase program by $10 million, bringing the current authorized share repurchases up to $14.1 million.

Unisys

CEO: Peter Altabef

June 30, 2017: $12.80

Sept. 29, 2017: $8.50

Change: -33.59%

Unisys has been in turnaround mode in recent years and while it made progress in 2016 in its efforts to return to sales growth and profitability, the company, No. 20 on the 2017 CRN Solution Provider 500, still has work to do.

For the first six months of 2017 (ended June 30), Unisys, based in Blue Bell, Pa., reported revenue of $1.33 billion, down 6 percent from $1.42 billion in the first half of 2016. The company reported a $74.7 million loss for the six months compared with the $18.3 million loss in the first half of 2016.

The company also reaffirmed its guidance for all of 2017, forecasting revenue to be between $2.65 billion and $2.75 billion. That would compare to $2.82 billion in revenue in 2016.

Black Box Network Services

CEO: E.C. Sykes

June 30, 2017: $8.55

Sept. 29, 2017: $3.25

Change: -61.99%

On Aug. 10 Black Box said that revenue in its fiscal 2018 first quarter (ended July 1) was $191.6 million, down 12 percent from $218.5 million in the first quarter of fiscal 2017. The company, based in Lawrence, Pa., reported a $9.7 million loss for the quarter compared with a $500,000 loss one year earlier.

President and CEO E.C. Sykes called the quarterly results "disappointing," noting that they were impacted by disruptions from centralization of the company's supply chain and back-office functions from 13 European countries into a single site; delayed implementation of an ERP system project that added to the quarter's costs; and lower revenue in the company's commercial services business due to fewer product shipments and fewer short-duration projects.