Avnet Q1 Earnings: Is NasdaqGS:AVT Cheap at 0.7x Price/Book?

in EARNINGS/INVESTING IDEAS by

Avnet, Inc. (NasdaqGS:AVT) is scheduled to report Q1 earnings results after markets close for trading on October 28, 2020.

The company is expected to report earnings of $0.12/share on revenue of $4.066 billion. The consensus earnings per share (EPS) of $0.12/share is based on a poll of 8 analysts and represents a decline in eps of −79.2% over the same quarter last year, when the company reported earnings of $0.60/share.

The revenue forecast of $4.066 billion based on a poll of 7 analysts implies a year-over-year (YoY) decline in revenue of −12.2%. Last year the company reported $4.63 billion in revenue for the quarter.

Expected to report EPS contraction of −79.2% for Q1, 2021
Metric Expected Prior Year YoY Change
Revenue $4,066.47 $4,630.01 −12.2%
EPS $0.12 $0.60 −79.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, and missed expectations 4 quarters.

What are your expectations from Avnet, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q4, 2020 $0.03 $0.64 2,437.7% Beat
Q3, 2020 $0.32 $0.38 20.1% Beat
Q2, 2020 $0.41 $0.40 −1.3% Missed
Q1, 2020 $0.65 $0.60 −7.4% Missed
Q4, 2019 $1.01 $0.95 −5.5% Missed
Q3, 2019 $1.08 $1.09 0.9% Beat
Q2, 2019 $1.04 $0.99 −4.7% Missed
Q1, 2019 $1.01 $1.03 2.4% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 27, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $28.94 $29.22 1.0% Increase
April 27, 2020 $28.14 $29.13 3.5% Increase
January 23, 2020 $41.47 $41.94 1.1% Increase
October 24, 2019 $40.89 $39.17 −4.2% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.93, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.93 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Avnet, Inc. is currently trading at $26.51/share, down −4.4% for the day. The company is trading at approximately 61.7% of its 52-week high of $43/share. The company’s stock price is down −9.3% since the last earnings report and down −5.3% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 38.95 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:AVT Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −88.72 and a forward P/E multiple of 20.00.

Avnet, Inc.’s current share price also implies a price-to-book (P/B) multiple of 0.70. The following table summarizes some other key fundamental ratios:

Data as of October 26, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q4
Period End Date June 27, 2020
Stock Price (Current) $26.51
P/E Ratio −88.7x
P/E Ratio (Fwd) 20.0x
PEG Ratio 0.8
Total Debt / Total Capital 38.7%
Levered Free Cash Flow $656.7 million
EV / EBITDA 9.6x

Finbox

Avnet, Inc. is a mid-cap stock with a market capitalization of $2.62 billion and a total enterprise value of $3.875 billion. The company operates in the Information Technology sector and the Electronic Equipment, Instruments & Components industry.

Avnet, Inc., a technology solutions company, markets, sells, and distributes electronic components. The company operates through two segments, Electronic Components and Farnell. The Electronic Components segment markets, sells, and distributes semiconductors; interconnect, passive, and electromechanical devices; and other integrated components from electronic component manufacturers. It also offers design chain support that provides engineers with technical design solutions; engineering and technical resources to support product design, bill of materials development, and technical education and training; and supply chain solutions that provide support and logistical services to original equipment manufacturers, electronic manufacturing service providers, and electronic component manufacturers. In addition, this segment provides integrated solutions, such as technical design, integration, and assembly of embedded products, and systems and solutions primarily for industrial applications, as well as for intelligent embedded and innovative display solutions comprising touch and passive displays. Further, it develops and manufactures standard board and industrial subsystems, and application-specific devices that enable it to produce systems tailored to specific customer requirements. This segment serves various markets, including automotive, medical, defense, aerospace, telecommunications, industrial, and digital editing. The Farnell segment distributes kits, tools, and electronic and industrial automation components, as well as test and measurement products to engineers and entrepreneurs. It has operations in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Avnet, Inc. was founded in 1921 and is headquartered in Phoenix, Arizona.

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