Analyst Note| Brian Colello, CPA |
Avnet reported preliminary fourth-quarter results, including expected 25% year-over-year top-line growth, operating margins of 2.3%, and adjusted EPS between $1.01 and $1.05. These results are comfortably above our estimates. While we have commented before on the strength Avnet and its competitor Arrow continue to enjoy in the Asian market, these results indicate a quarter with even better results from this key, high-growth market for Avnet. Alongside the robust demand in Asia, management cited continued improvement in the Americas market as contributing to the better-than-expected results. While the preliminary results are above the high end of the company’s prior guidance and our estimates, we are waiting until the official quarterly results are released in August to review our fair value estimate, as they should better specify the persistence of this quarter’s drivers and provide additional details on management’s expectations going forward. For now, we reiterate our fair value estimate of $43 for the narrow-moat name. With shares currently trading at $39, we view Avnet as marginally undervalued.