Ingram Micro Inc. (IM) reported third-quarter 2014 non-GAAP earnings (excluding amortization of intangible assets and reorganization charges) of 62 cents per share, which came in line with the Zacks Consensus Estimate. On a year-over-year basis, earnings increased 16.9%.
Revenues
Ingram Micro’s third-quarter revenues of $11.24 billion beat the Zacks Consensus Estimate of $10.92 billion and increased 10.7% from the year-ago quarter. The company’s Technology and other solutions revenues increased 5% year over year to $9.3 billion while its mobility business generated revenues of $2 billion, a year-over-year increase of 50%.
Geographically, revenues from North America increased 19.3% on a year-over-year basis and came in at $5.13 billion. Revenues from Europe increased 9.3% year over year to $3.20 billion. Moreover, revenues from Latin America were up 17% year over year to $524.9 million. However, revenues from Asia-Pacific decreased 3.7% to $2.38 billion year over year.
Operating Results
Ingram Micro’s gross margin came in 5.8% compared with 5.9% in the year-ago quarter. The company’s operating expenses increased 11.6% year over year to $494.4 million. However, as a percentage of revenues, expenses were up 4 basis points (bps). The company also witnessed 0.6% increase in non-GAAP operating income which came in at $160.8 million, while margins were down 15 bps to 1.43%.
Ingram Micro reported non-GAAP net income of $98.5 million or 62 cents per share compared with $83.1 million or 53 cents in the year-ago quarter. Non-GAAP net income excludes the effect of intangible assets and reorganization charges.
Balance Sheet & Cash Flow
Ingram Micro exited the third quarter with cash and cash equivalents of $497.8 million compared with $470.7 million in the previous quarter. Accounts receivable were $4.86 billion. Total debt (including current portion) was $1.13 billion as against $1.16 billion in the previous quarter.
Guidance
For the fourth quarter of 2014, Ingram Micro expects its revenues to increase 8% to 12% year over year and non-GAAP earnings to range between 95 cents and $1.02 per share (mid-point 99 cents). The Zacks Consensus Estimate is pegged at 98 cents.
Conclusion
Ingram Micro reported modest third-quarter results and guided affirmatively. We believe that an improving IT spending trend will help Ingram post better results, going forward. Moreover, the company’s focus on the high-margin market and strategic acquisitions to increase market share are encouraging.
Ingram Micro has been striking distribution deals with a number of original equipment manufacturers thus expanding its product portfolio. Moreover, Ingram Micro’s exposure in cloud computing products is expected to drive growth.
Though Ingram Micro’s significant European exposure and a high debt burden are the concerns, we remain fairly optimistic about its strategic relationships with network giants such as Juniper Networks Inc. (JNPR), Cisco (CSCO) and International Business Machines Corp (IBM). However, its debt burden remains the headwind.
Currently, Ingram Micro has a Zacks Rank #4 (Sell).
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