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A month has gone by since the last earnings report for Arrow Electronics (ARW). Shares have added about 11.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arrow Electronics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Arrow’s Second-Quarter Results
Arrow Electronics reported second-quarter 2020 adjusted earnings per share of $1.59, which beat the Zacks Consensus Estimate $1.45. However, quarterly earnings were down a penny on a year-over-year basis.
Revenues came in at $6.61 billion, down 11% from the year-ago quarter. Adjusted revenues dropped 8% year over year. The revenue figure, however, beat the consensus mark of $6.37 billion.
The company witnessed impressive demand for software, cloud and security solutions during the second quarter as firms needed to enable business continuity and remote working amid social-distancing measures.
Segmental Details
Adjusted revenues from Global Components decreased 8% year over year to $4.72 billion. On a reported basis, revenues declined 10%. Region wise, the segment’s adjusted revenues from the Americas decreased 18% year over year. Adjusted sales from the Asia Pacific declined 7% year over year. Global Components’ contribution from Europe fell 18% on an adjusted basis.
Adjusted revenues from Global Enterprise Computing Solutions (ECS) came in at $1.89 billion, down 8% year over year. Region wise, the segment’s adjusted revenues from the Americas slid 11% year on year. Global ECS’s contribution from Europe fell 4% on an adjusted basis.
Margins
Arrow’s non-GAAP gross profit slipped 12.1% from the prior-year quarter to $739.8 million.
Operating income dropped 17.5% to $200.3 million.
Balance Sheet and Cash Flow
Arrow exited the June-end quarter with cash and cash equivalents of $203 million compared with the previous quarter’s $201 million.
Long-term debt was $2.1 billion compared with the $2.22 billion witnessed at the end of the prior quarter.
The company’s cash flow from operations was $418.2 million.
In the second quarter, Arrow returned $72.8 million to shareholders through the stock-repurchase program. The company, on Jul 30, announced a new share-repurchase program worth $600 million.
Guidance
For the third quarter of 2020, sales are estimated between $6.325 billion and $6.925 billion.
Global Components sales are projected at $4.675-$4.975 billion. Global ECS sales are estimated to be $1.65-$1.95 billion.
Interest expenses will presumably be about $33 million. As a result, the company projects non-GAAP earnings per share at $1.54-$1.70.