Tech Data Corp. TECD is set to release fourth-quarter fiscal 20Array6 results on Mar 3. Last quarter, the company posted a negative earnings surprise of 3.76%. It delivered positive surprises in two of the trailing four quarters, with an average beat of Array2.93%.
Let us see how things are shaping up for this announcement.
Factors at Play
Tech Data seems well positioned to achieve decent growth driven by increasing demand for data center systems, cloud and mobility offerings. The company’s efforts to diversify into new domains bode well. A higher level of spending is expected to boost Tech Data’s revenues as it consolidates its position in the fast-growing domains of data center, mobile technology, software and integrated supply chain.
In fiscal fourth quarter, Tech Data collaborated with a number of companies which should drive growth. The company expanded its product portfolio by including Hewlett Packard Enterprise HPE Aruba Networks which enhances its converged campus network solution. In addition, it started offering warranty attach services for HP Inc. HP and Hewlett Packard. A couple of other notable collaborations include agreements with Brocade (to offer the Virtual Application Delivery platform) and Infinio Systems Inc. (to offer their data center solutions).
Tech Data has been undertaking strategic initiatives to review and strengthen its operations which should boost results. The company’s cost-controlling measures are the other positives.
However, it’s exit from businesses in less profitable regions, though a positive in the long run, will weigh on the near-term results. Also, of late, Tech Data’s business has been affected by sluggish demand in the Americas. For this, the company is focusing more on high-growth areas including mobility, cloud, data center, integrated supply chain and value-added services.
For fourth-quarter fiscal 20Array6, management expects revenues in the range of $7.05–$7.25 billion (on a constant currency basis), on assumption of mid single-digit sales growth in both the Americas and Europe. The guidance excludes $78 million in sales which were garnered in the prior-year quarter from the businesses in Chile, Peru and Uruguay, which have since been divested.
Earnings Whispers
Our proven model does not conclusively show that Tech Data is likely to beat earnings in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #Array (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Tech Data has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.Array0.
Zacks Rank: Tech Data’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a stock you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Superior Industries International, Inc. SUP, with an Earnings ESP of +ArrayArray.ArrayArray% and a Zacks Rank #Array.
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