Tech Data (TECD) stock gains on fourth-quarter earnings and beats sales.

Tech Data Co., Ltd. TECD reported fourth-quarter fiscal 2016 non-GAAP earnings of $2.29 per share, beating the Zacks Consensus Estimate of $2.10. Earnings also increased from his $1.96 a year earlier.

Following this announcement, the stock price rose 1.62% in yesterday’s trading.

Quarter details

Tech Data’s revenue increased 2% from the prior year to $7.5 billion, beating the Zacks Consensus Estimate of $7.1 billion.

Revenue from the Americas (36% of revenue) increased 5%, while revenue from Europe (64%) was flat year over year.

The company’s gross profit for the quarter was $354.6 million, down from $372.3 million in the year-ago period. Gross profit margin was 4.74%, slightly down from 5.07% in the same period last year.

Non-GAAP selling, general and administrative (SG&A) expenses for the reported quarter decreased 8.7% year over year to $237.8 million. SG&A expenses as a percentage of sales decreased to 3.18% from 3.55% in the same period last year.

As a result, non-GAAP operating income increased 4.6% year over year to $116.8 million. Non-GAAP operating margin improved 4 basis points (bps) year-on-year to 1.56%.

Regionally, non-GAAP operating income decreased 1.3% in the Americas, but increased 6.7% in Europe.

Non-GAAP net income was $80.9 million, compared to $74.9 million in the prior-year period.

Balance sheet and cash flow

At the end of fiscal 2016, Tech Data had cash and cash equivalents of approximately $531.2 million, compared to $543.0 million at January 31, 2015. Total long-term debt was $348.6 million, down from $351.6 million as of January 31, 2015.

In the fourth quarter, Tech Data had cash outflows of $32 million. Operating cash flow for fiscal year 2016 was $189 million.

In the same year, the company returned approximately $147 million through stock buybacks.


Management expects first quarter 2017 sales to be in the range of $5.85 billion to $6.05 billion, excluding currency effects. The company expects its non-GAAP effective tax rate to be 30% to 32%.

Tech Data expects non-GAAP earnings per share in the range of 90 cents to 98 cents.

our view

Tech Data is making strategic efforts to rethink and strengthen its operations, including partnering with new vendors and expanding its coverage model. Additionally, the company is focusing on developing integrated supply chain, value-added services, data center, cloud, and consumer electronics capabilities, which is a positive thing. The company’s cost control measures are already boosting profitability.

The company had previously taken several initiatives to further focus on high-growth regions in the Americas, resulting in strong growth this quarter. Business in Europe also remains strong.

However, the company faces strong competition in the technology distribution industry from peers such as Ingram Micro Inc. IM, SYNNEX Corp. SNX, and Arrow Electronics, Inc. ARW.

Tech Data currently has a Zacks Rank of #2 (Buy).

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