Core Insights - Avnet reported second-quarter fiscal 2026 results that exceeded the high end of the company's sales and earnings guidance, driven by record revenue in Asia and improved demand across multiple end markets [5][7] Financial Performance - Adjusted operating income was $172 million with a total adjusted operating margin of 2.7% [1] - Sales reached $6.3 billion, representing a 12% year-over-year increase and a 7% sequential increase, surpassing guidance [3][7] - Adjusted diluted earnings per share (EPS) were $1.05, exceeding the high end of guidance for the quarter [7] - Gross margin was reported at 10.5%, described as "flattish" year-over-year and slightly up sequentially [2] Segment Performance - Electronic components generated an operating income of $187 million with a 3.2% operating margin, while Farnell produced an operating income of $20 million with a 4.7% operating margin, the latter being the highest since fiscal 2023 [1][4] - Farnell's gross margins improved by over 100 basis points year-over-year but decreased by 25 basis points sequentially [2] Regional Highlights - Asia sales exceeded $3 billion, marking the sixth consecutive quarter of year-over-year growth and now account for over 50% of total sales [3][12] - Sales in Europe increased year-over-year and sequentially, with clear signs of recovery noted [13] - The Americas also saw sales growth for the second consecutive quarter, led by aerospace and defense [14] Demand and Supply Chain Dynamics - Demand signals are resetting higher, particularly driven by data center and AI demand, with lead times trending upward across most product categories [9][10] - The pricing environment remained stable, although spot price increases were noted in some areas, indicating potential upward pricing pressure as supply tightens [11] Working Capital and Inventory Management - Working capital improved with inventory reduced by $126 million, resulting in 86 days of inventory at quarter-end [6][18] - The company aims to reduce total inventory days to below 80 [18] Guidance and Outlook - For Q3 fiscal 2026, sales are guided to be between $6.2 billion and $6.5 billion, with diluted EPS expected to be between $1.20 and $1.30, implying modest sequential growth [20][21] - The guidance reflects anticipated growth in the Americas and EMEA, with a slight seasonal decline in Asia due to the Lunar New Year [21]

Financial Data and Key Metrics Changes - The company achieved sales of $6.3 billion in the second quarter, representing a 12% year-over-year increase and a 7% sequential increase [13][4] - Adjusted diluted earnings per share were $1.05, exceeding the high end of guidance and growing nearly four times compared to the previous quarter [16][21] - Operating margin for electronic components was 3.2%, while Farnell's operating margin was 4.7%, marking the highest for Farnell since fiscal 2023 [16][11] Business Line Data and Key Metrics Changes - Electronic components sales increased by 11% year-over-year and 7% sequentially, with a constant currency increase of 9% year-over-year [13][14] - Farnell sales grew by 24% year-over-year and 7% sequentially, with a constant currency increase of 20% year-over-year [14][10] - Demand creation revenues increased sequentially by 7%, indicating positive trends in converting design wins into revenues [9] Market Data and Key Metrics Changes - Sales in Asia reached a record high of over $3 billion, marking the sixth consecutive quarter of year-on-year sales growth in the region [8][13] - Year-over-year sales increased by 17% in Asia, 8% in Europe, and 5% in the Americas [13] - The pricing environment remained stable, but upward pricing pressure is anticipated across many technologies due to supply dynamics [7][34] Company Strategy and Development Direction - The company is focused on expanding operating margins, optimizing inventory, and generating cash flow while making necessary investments for future growth [5][12] - There is an emphasis on improving return on working capital and overall return on invested capital [20][19] - The company aims to leverage its diverse supplier line card and customer base to drive profitable growth [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand signals and improving visibility into customer orders [6][29] - The company anticipates continued growth and margin expansion in 2026, supported by a recovering market and improved operational leverage [12][21] - Management noted that the demand for electronic components is broadening, driven by sectors such as data centers and artificial intelligence [5][6] Other Important Information - The company generated $208 million in cash flow from operations during the quarter and reduced inventory by $126 million [20][17] - The company paid a quarterly dividend of $0.35 per share, totaling $28 million [21] - Guidance for the third quarter of fiscal 2026 includes sales in the range of $6.2 billion to $6.5 billion and diluted earnings per share between $1.20 and $1.30 [21] Q&A Session Summary Question: Can you discuss the linearity of orders during the quarter and the duration of your backlog? - Management noted that bookings typically tail off in December, but billings continue, indicating a positive trend in order visibility and customer engagement [25][26][29] Question: What are the pricing pressures in specific end markets? - Management indicated that while pricing has remained stable, there are signs of upward pressure in memory, storage, and certain capacitors, driven by increased demand from data centers [34][49] Question: How do you expect the March quarter to perform relative to seasonality? - Management expects a typical seasonal bounce back in the West, with high single-digit growth anticipated, while Asia may see a less than seasonal decline due to Lunar New Year [38][45] Question: Can core business margins grow year-over-year for the remaining quarters? - Management expressed confidence in margin expansion as the West recovers, with expectations for continued momentum in operating margins [45][46] Question: How does pricing from suppliers impact revenues and margins? - Management explained that pricing affects average selling prices, with contracted customers absorbing price increases, while spot buys can lead to improved margins [48][49]

Financial Data and Key Metrics Changes - The company achieved sales of $6.3 billion in the second quarter, representing a 12% year-over-year increase and a 7% sequential increase [13][4] - Operating margin for the electronic components business was 3.2%, while Farnell's operating margin was 4.7% [4][16] - Adjusted diluted earnings per share reached $1.05, exceeding the high end of guidance and growing nearly four times compared to the previous quarter [16][21] - Gross margin was stable at 10.5%, with electronic component gross margins impacted by faster growth in Asia compared to the West [14][16] Business Line Data and Key Metrics Changes - Electronic components sales increased by 11% year-over-year and 7% sequentially, with Farnell sales growing 24% year-over-year and 7% sequentially [13][14] - Demand creation revenues increased sequentially by 7%, indicating a positive trend in converting design wins into revenues [9] - The IP&E business experienced double-digit growth year-over-year, contributing to higher gross margins [10] Market Data and Key Metrics Changes - Sales in Asia reached a record high of over $3 billion, marking the sixth consecutive quarter of year-over-year growth in the region [8] - Year-over-year sales growth was 17% in Asia, 8% in Europe, and 5% in the Americas [13] - The pricing environment remained stable, but upward pricing pressure is anticipated across many technologies due to supply dynamics [7] Company Strategy and Development Direction - The company is focused on expanding operating margins, optimizing inventory, and generating cash flow while investing in future growth [5][12] - There is an emphasis on improving return on working capital and maintaining a strong balance sheet by reducing leverage [20] - The company aims to leverage its diverse supplier line card and customer base to enhance its market position [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand signals and improving visibility from customers [29][45] - The company anticipates continued growth and margin expansion in 2026, supported by a recovery in the West and improved demand in Asia [12][22] - Management noted that the current operating environment presents opportunities to address supply chain complexities [7] Other Important Information - The company generated $208 million in cash flow from operations during the quarter and reduced inventory by $126 million [20][17] - The third quarter guidance projects sales between $6.2 billion and $6.5 billion, with expectations for growth in the Americas and EMEA [21] Q&A Session Summary Question: Can you discuss the linearity of orders during the quarter? - Management noted that bookings typically tail off in December, but billings continue, indicating a positive book-to-bill ratio [25][26] Question: What are the pricing pressures in specific end markets? - Management indicated that pricing pressures are emerging in memory, storage, and certain capacitors, driven by demand from data centers and industrial customers [33][34] Question: How does the company view operating margin growth for the remaining quarters? - Management expects continued momentum in operating margins, particularly as the West recovers, with a focus on improving profitability [45][46]

Financial Data and Key Metrics Changes - The company achieved sales of $6.3 billion in Q2 2026, representing a 12% year-over-year increase and a 7% sequential increase [12] - Adjusted diluted earnings per share reached $1.05, exceeding the high end of guidance and growing nearly four times compared to the previous quarter [15] - Gross margin for the quarter was 10.5%, remaining stable year-over-year and slightly up sequentially [13] Business Line Data and Key Metrics Changes - Electronic components sales increased by 11% year-over-year and 7% sequentially, with constant currency sales up 9% year-over-year [12] - Farnell sales grew 24% year-over-year and 7% sequentially, with constant currency sales up 20% year-over-year [12] - Operating margin for electronic components was 3.2%, while Farnell's operating margin was 4.7%, marking the highest for Farnell since fiscal 2023 [15] Market Data and Key Metrics Changes - Sales in Asia increased by 17% year-over-year, accounting for over 50% of total sales, compared to approximately 48% in the previous quarter [12] - EMEA sales grew 8% year-over-year, showing signs of recovery across most end markets [12] - The Americas saw a 5% year-over-year sales increase, with aerospace and defense leading the growth [12] Company Strategy and Development Direction - The company is focused on expanding operating margins, optimizing inventory, and generating cash flow while investing in future growth [4] - There is an emphasis on demand creation, supply chain services, and embedded solutions to drive growth and margin expansion [8] - The company aims to improve return on working capital and overall return on invested capital [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a diverse supplier line card and a stable leadership team [10] - Demand signals are improving globally, with lead times trending higher across most product categories, driven by data center and AI demand [5] - The company anticipates continued growth and margin expansion in 2026, supported by a favorable regional mix and improving market conditions [21] Other Important Information - The company generated $208 million in cash flow from operations during the quarter and reduced inventory by $126 million [18] - Working capital days decreased to 88 days, indicating improved efficiency [16] - The company paid a quarterly dividend of $0.35 per share, totaling $28 million [19] Q&A Session Summary Question: Can you discuss the linearity of orders during the quarter and the duration of the backlog? - Management noted that bookings typically tail off in December, but billings continued strongly, with positive book-to-bill ratios [24][25] - There is an increasing trend of customers placing orders within lead times, indicating improved visibility [26] Question: What are the pricing pressures in specific end markets? - Management indicated that pricing pressures are emerging in memory, storage, and certain capacitors, driven by increased demand from data centers [32][33] Question: How does the guidance for the March quarter compare to previous years? - Management expects typical seasonality with growth in the West, while Asia may see a less significant decline due to Lunar New Year [35][36] Question: Will core business margins grow year-over-year for the remaining quarters? - Management anticipates continued momentum in operating margins, especially as the West recovers [44][45] Question: How do supplier price increases impact revenues and margins? - Price increases affect average selling prices, with contracted customers absorbing costs, while spot buys can lead to higher margins [47][48] Question: Can Farnell margins accelerate with the recovery in Europe? - Management expects incremental improvements in Farnell margins, potentially exceeding 50-100 basis points as revenues increase [50][51]

For the quarter ended December 2025, Avnet (AVT) reported revenue of $6.32 billion, up 11.6% over the same period last year. EPS came in at $1.05, compared to $0.87 in the year-ago quarter.The reported revenue represents a surprise of +5.28% over the Zacks Consensus Estimate of $6 billion. With the consensus EPS estimate being $0.95, the EPS surprise was +10.53%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next m ...

Avnet Second Quarter Fiscal Year 2026 Financial Results January 28, 2026 Safe Harbor Statement Regional demand • Growth in Asia, the Americas and EMEA Y/Y End market demand This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the financial condition, results of operations, and business of the Company. You can find many of these statements by looking fo ...

Core Insights - The year 2025 began with strong optimism for stock prices, but this was quickly challenged by low-cost AI initiatives from China, tariff issues, high inflation, and elevated interest rates [1] - Investor sentiment improved midyear as trade tensions eased and the Federal Reserve cut interest rates three times, but a U.S. government shutdown and concerns over AI sector valuations dampened enthusiasm [2] Investment Opportunities - Despite market volatility, investing in stocks remains viable; following broker recommendations and maintaining a watchlist of broker-favorite stocks can be beneficial [3][4] - A screening strategy was developed to identify stocks with improving broker recommendations and upward earnings estimate revisions, utilizing the price/sales ratio as a complementary valuation metric [5][6] Stock Highlights - Bunge Global SA (BG) is undergoing a strategic overhaul with the Viterra merger to enhance global scale and long-term returns; it has surpassed earnings estimates in three of the last four quarters with an average beat of 11.75% [8][9] - Air Canada (ACDVF) has seen a 98.9% increase in earnings estimates for 2026 due to strong travel demand and lower fuel costs, surpassing earnings estimates in two of the last four quarters [9][10] - Adient (ADNT), a major automotive seating supplier, has a strong market position with a 23.62% average earnings beat over the last four quarters [11] - Arrow Electronics (ARW) has a projected EPS growth rate of 10.7% over the next 3-5 years and has consistently surpassed earnings estimates, with an average beat of 14.6% [12][13] - ChargePoint Holdings (CHPT) is a leader in EV charging, recently launching a next-gen software platform; its earnings estimates for fiscal 2026 and 2027 suggest year-over-year improvements of 32.4% and 35.8%, respectively [14][15]

Core Viewpoint - Avnet (AVT) is currently rated as a Zacks Rank 5 (Strong Sell) despite having recently surpassed the Zacks Consensus Estimate for earnings [1] Company Overview - Avnet, Inc. specializes in the distribution and sale of electronic components, operating through two segments: Electronic Components and Farnell [2] - The Electronic Components segment focuses on marketing and selling semiconductors, interconnects, passive and electromechanical devices, and integrated components [2] - The Farnell segment is dedicated to distributing electronic components and related products to the electronic system design community through multi-channel sales and marketing resources [2] - Founded in 1921 by Charles Avnet, the company is headquartered in Phoenix, AZ [2] Earnings History - Avnet has beaten the Zacks Consensus Estimate in three of the last four quarters, indicating some level of management effectiveness in meeting market expectations [4] - The most recent quarter reported an EPS of $0.84, exceeding the consensus estimate of $0.81 [4] Earnings Estimates - Recent trends show a decline in annual earnings estimates for Avnet, with the current fiscal year consensus dropping from $4.61 to $4.36 over the last 90 days [5] - The next fiscal year's estimate has also decreased from $6.68 to $6.50 in the same timeframe [5] - The negative movement in earnings estimates is a significant factor contributing to Avnet's Zacks Rank of 5 (Strong Sell) [5] Market Context - A broader trend within the Zacks universe indicates that many stocks are experiencing negative earnings estimate revisions, leading to a decline in their rankings [6]

Financial Data and Key Metrics Changes - The company achieved sales of $5.9 billion in the first quarter, exceeding guidance and reflecting a 5% increase year-over-year and sequentially [4][10] - Adjusted EPS was $0.84, near the high end of guidance [4] - Gross margin for the quarter was 10.4%, down 42 basis points year-over-year and 15 basis points sequentially [10][11] - Adjusted operating income was $151 million, with an adjusted operating margin of 2.6% [12] Business Line Data and Key Metrics Changes - Electronic components sales increased by 5% year-over-year and sequentially, driven by demand in Asia and the Americas [10][11] - Farnell sales grew by 50% year-over-year and 3% sequentially, with stable operating margins [10][11][12] - The IP&E segment showed steady sales with improving margins, particularly in Asia [7] Market Data and Key Metrics Changes - Sales in Asia grew by 10% year-over-year, representing over half of electronic components sales [10][11] - The Americas region saw a 3% year-over-year increase in sales, marking the first growth since fiscal 2023 [4][10] - EMEA sales were flat year-over-year and down 6% in constant currency [10] Company Strategy and Development Direction - The company is focused on balancing growth opportunities with inventory optimization [5][14] - There is an emphasis on enhancing digital capabilities and leveraging the core ecosystem for new opportunities, particularly in Farnell [7] - The company aims to reduce leverage to approximately 3.0 times over the next year while maintaining a strong balance sheet [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery in Asia and progress in the Americas, with stabilizing conditions in EMEA [8][9] - There are positive signs from supplier partners regarding lead times and potential price increases, indicating a strengthening market [9][33] - The company anticipates modest growth in the December quarter, particularly in Europe, as bookings have improved [29] Other Important Information - The company increased its quarterly dividend by approximately 6% to $0.35 per share [16] - The company repurchased approximately 2.6 million shares, totaling $138 million, representing 3% of outstanding shares in the first quarter [16] Q&A Session Summary Question: Exposure to AI applications in data centers - Management indicated that exposure to hyperscalers is relatively small, around 7% of Asia-Pac business, with opportunities in storage, connectivity, and power [19][20] Question: Inventory days and cash flow expectations - Management noted that inventory days decreased slightly, with expectations for further declines as sales grow [21][22][24] Question: Demand profile for EMEA in December quarter - Management expects modest growth in EMEA, indicating that the region is hitting the bottom after a tough period [29] Question: Incremental margins and operating leverage - Management indicated that the return to year-over-year growth in total business should provide operating leverage and expand margins [30][31] Question: Potential price increases from suppliers - Management noted that certain technologies are seeing potential price increases, particularly in memory and interconnect products [32][33] Question: Core segment margins and future expectations - Management expressed cautious optimism about achieving core margins above 4% in fiscal 2026, depending on mix shifts and market recovery [38][39] Question: Farnell margins and revenue impacts - Management indicated that Farnell margins could continue to grow, but product mix will play a significant role [41][43]

Financial Performance - Q1 FY26 - Revenue reached $5.9 billion, a 5% year-over-year increase[11] - Adjusted operating margin was 2.6%[11], a decrease of 46 bps year-over-year[17] - Adjusted diluted EPS was $0.84, a 9% decrease year-over-year[11, 20] - SG&A expenses as a percentage of gross profit increased to 75.6% from 72.2% in Q1 FY25[13, 14] Regional and Segment Performance - Asia accounted for 49% of revenue[12], with a 10% year-over-year growth in constant currency[12] - Americas showed a 3% year-over-year revenue growth in constant currency[12] - EMEA region's revenue was flat year-over-year, but decreased by 6% in constant currency[7, 12] - Electronic Components segment revenue was $5.5 billion, a 5% increase year-over-year[12] - Farnell segment revenue was $399 million, a 15% increase year-over-year[12] Balance Sheet and Liquidity - Inventory was $5.4 billion, an increase of $185 million quarter-over-quarter[22] Outlook for Q2 FY26 - Sales are projected to be between $5.85 billion and $6.15 billion, with a midpoint of $6.00 billion[23] - Adjusted diluted EPS is expected to be between $0.90 and $1.00, with a midpoint of $0.95[23]