Ingram Micro Inc. IM reported second-quarter 2015 non-GAAP earnings (excluding amortization of intangible assets, reorganization charges and other one-time items) of 55 cents per share, a penny above the Zacks Consensus Estimate. Moreover, earnings increased on a year-over-year basis.The company revealed that translation of foreign currencies had a neutral impact on non-GAAP earnings.
Revenues
Ingram Micro’s second-quarter revenues of $10.55 billion missed the Zacks Consensus Estimate of $10.91 billion and decreased 3.3% from the year-ago quarter. The year-over-year decrease was primarily due to translation of foreign currencies, which had an 8% negative impact.
Geographically, revenues from North America were roughly flat year over year and came in at $4.61 billion. Moreover, revenues from Latin America (up 14.7% year over year) and Asia-Pacific (up 5.2% year over year) came in at $598.3 million and $2.48 billion, respectively. However, revenues from Europe decreased 16.5% year over year to $2.86 billion.
Operating Results
Ingram Micro’s gross margin came in at 6.2% compared with 5.8% in the year-ago quarter. The increasewas primarily due to the addition of ANOVO's mobility services business. Also, better-than-expected growth in the base business and strength in North America Europe, and Asia Pacific contributed to margin expansion.
The company’s operating expenses increased 22.31% year over year to $654.72 million. Also, as a percentage of revenues, expenses were up41 basis points (bps), primarily due to higher foreign exchange losses relatedto volatility in global currencies.
The company also recorded a 2.9% increase in non-GAAP operating income, which came in at $150.5 million, primarily due to the recent acquisition in the mobility business Operating margin also increased9 bps year over year to 1.4%.
Ingram Micro reported non-GAAP net income of $87.7 million or 55 cents per share. Non-GAAP net income excludes the effect of intangible assets, reorganization charges and other one-time items.
Balance Sheet & Cash Flow
Ingram Micro exited the secondquarter with cash and cash equivalents of $766.5 million compared with $509.9 million in the previous quarter. Accounts receivable were $4.92 billion. Total debt (including current portion) was $1.18 billion as against $1.42 billion in the last quarter. The company generated cash flow of approximately $570 million from operational activities.
Guidance
For the third quarter of 2015, Ingram Micro expects revenues to be in the range of $10.5 billion to $11 billion. Non-GAAP earnings per share are anticipated to come in the range of 60 to 68 cents. The Zacks Consensus Estimate for revenues and earnings ispegged at $11.3 billion and 66 cents, respectively.
Conclusion
Ingram Micro reported mixed second-quarter 2015 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same. Moreover, revenues decreased on a year-over-year basis primarily due to foreignexchange fluctuations. Further, the company provided tepid guidance for third-quarter 2015 anticipating a significant negative impact from foreign exchange rates.
Nonetheless, the company’s focus on the high-margin market and strategic acquisitions to increase market share are encouraging. Moreover, we believe that an improving IT spending trend will help Ingram post better results, going forward.
Ingram Micro has been striking distribution deals with a number of original equipment manufacturers, thereby expanding its product portfolio. Additionally, Ingram Micro’s exposure in cloud computing products is expected to drive growth.
Going forward, we remain fairly optimistic about Ingram Micro’s strategic relationship with network giants such as Juniper Networks Inc. JNPR and International Business Machines IBM. The company’s growing exposure in the small and medium Business (SMB) and improving profitability are encouraging. However, its significant European exposure and debt burden remain concerns.
Currently, Ingram Micro has a Zacks Rank #3 (Hold).
Investors may consider a better-ranked technology stock, Cirrus Logic Inc. CRUS, carrying a Zacks Rank #2 (Buy).
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