Shares of electronic component distributor Arrow Electronics ARW hit a new 52-week high of $64.05 on Mar 20, eventually closing at $63.92. The closing share price represents a one-year return of approximately 13% and a modest year-to-date return of 10.4%. The average trading volume for the last three months aggregated roughly 475K shares.
Moreover, Arrow’s share price increased 11.2% since the release of its fourth-quarter 2014 results on Feb 5. The company posted better-than-expected results. Both the year-over-year comparisons as well as the book-to-bill ratio were favorable.
Arrow’s strong distribution channels are being preferred by original equipment manufacturers, contract manufacturers and commercial customers for marketing their products. The company’s core strength in providing best-in-class services and easy-to-acquire technologies will act as growth catalysts, going forward.
Moreover, the company has secured a significant market share through a broad portfolio of products and services, and continued efforts to maximize consumer satisfaction. Additionally, incremental sales from the strategic acquisitions, such as Computerlinks, are expected to boost Arrow’s top line, going forward.
It is worth noting that spending on electronic equipment is dependent on the overall IT spending. Per the U.S. research firm Gartner, overall IT spending is expected to grow 2.4% in 2015 which will mostly be driven by enterprise software and IT services. As a specialized distributor of these products and services, Arrow Electronics stands to benefit from the projected increase.
Additionally, Arrow Electronics has provided an encouraging guidance. For the first quarter of 2015, the company expects sales to range between $4.9 billion and $5.3 billion (mid-point $5.1 billion). The Zacks Consensus Estimate is pegged at $5.13 billion.
Global components sales are projected between $3.35 billion and $3.55 billion. Global enterprise computing solutions sales are estimated between $1.55 billion and $1.75 billion. The company expects non-GAAP earnings to range within $1.27 to $1.39 per share (mid-point $1.33). The Zacks Consensus Estimate currently stands at $1.32.
However, a significant portion of the company’s revenues comes from the sale of semiconductors, which is a cyclical industry characterized by changes in technology and manufacturing capacity and subject to significant market upturns and downturns. Moreover, competition from Avnet AVT and Ingram Micro IM are the concerns, going forward.
Currently, Arrow has a Zacks Rank #3 (Hold). A better-ranked technology stock worth considering is Cirrus Logic Inc. CRUS sporting a Zacks Rank #1 (Strong Buy).
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