Tech Data Corp. TECD is set to release third-quarter fiscal 2018 results on Nov 27.
Last quarter, the company delivered a negative earnings surprise of 15.53%. It has pulled off positive surprises in three of the trailing four quarters, with an average beat of 11.20%.
Per management, earnings were marred by a combination of execution challenges as well as market dynamics.
Tech Data Corporation Price and EPS Surprise
Tech Data Corporation Price and EPS Surprise | Tech Data Corporation Quote
However, revenues of $8.88 billion surpassed the Zacks Consensus Estimate of $8.71 billion. The top line grew 39.8% on a year-over-year basis. This improvement was owing to strong contribution from the acquisition of Avnet’s AVT Technology Solutions business. For third-quarter fiscal 2018, Tech Data forecasts net sales in the range of $9-$9.35 billion. Non-GAAP earnings are anticipated to be in the $1.84-$2.04 per share band.
Year to date, shares of Tech Data have also outperformed the industry. While the stock was up 8.3%, the industry gained 7.5%.
Let us see how things are shaping up for this announcement.
Factors at Play
We believe that Tech Data is well positioned to grow significantly based on increasing demand for data center systems, and cloud and mobility offerings in the long run. Additionally, the company’s efforts to diversify into new domains are impressive.
Also, the company’s diversified customer base in both North America and Europe is a positive. Meanwhile, Tech Data continues to strengthen its position in the small and medium-business (SMB) customer segment in several countries.
Acquisitions and strategic alliances have been an integral part of the company’s growth strategy. In February 2017, Tech Data completed the acquisition of the Technology Solutions business from Avnet. The transaction has given Tech Data access to the Asia-Pacific region.
Nevertheless, lower demand for legacy enterprise servers and storage might dampen growth. Yet, growing corporate PC demand in North America is encouraging. .
We believe the company’s exit from businesses in less profitable regions, though a positive in the long run, might weigh on near-term results.
Earnings Whispers
Our proven model does not show that Tech Data is likely to beat earnings in the soon-to-be reported quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. That is not the case here as you will see below.