Computer products distributor Synnex Corp. (SNX), Tuesday reported a 29 percent increase in first-quarter profit, despite a decline in revenues, as bottom line reflected stronger operating margins and lower cost of revenues. Earnings for the quarter came in well ahead of Street estimates, while revenues fell short of expectations.
Nevertheless, the second-quarter guidance provided by Synnex is clearly below analysts' estimates. Following the news, shares of Synnex fell eight percent in extended trading hours.
Synnex currently estimates second-quarter earnings in a range of $0.87 to $0.91 per share on revenues of $2.45 billion to $2.55 billion. Analysts currently expect earnings of $0.95 per share and revenues of $2.60 billion for the quarter.
First-quarter operating margin advanced 57 basis points, while cost of revenues dropped to $2.29 billion from $2.36 billion last year.
The Fremont, California-based Synnex's attributable net income for the first quarter improved to $38.2 million or $1.02 per share from $29.7 million or $0.80 per share last year. On average, nine analysts polled by Thomson Reuters expected earnings of $0.92 per share the quarter. Analysts' estimates typically exclude special items.
Synnex, which competes with Arrow Electronics, ScanSource, Ingram Micro and Avnet, said first-quarter revenues dropped 1.6 percent to $2.46 billion, below analysts' estimate of $2.55 billion.
Revenues declined due mainly to a 1.8 percent revenue drop at distribution segment, which represents about 98 percent of total revenues. Global business services revenues, which is a minor segment, grew 14.8 percent to $45.1 million.
Chief Executive Kevin Murai said, "Our distribution business mix continued to shift towards higher margin value added products and services. We also had a solid quarter for signing new contracts in our GBS division. We expect these new business wins will ramp up in the coming quarters and are then expected to contribute to margin expansion in the GBS division."
SNX closed Tuesday's trading on the NYSE at $43.64, down 0.57%. The stock further lost 8.41% in after-hours.
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