Arrow Electronics (ARW) Tops Q1 Earnings & Revenue Estimates

Arrow Electronics ARW reported impressive first-quarter 2022 results. The company’s adjusted earnings of $5.43 per share beat the Zacks Consensus Estimate of $4.53. The bottom line improved by a whopping 91% on a year-over-year basis.

In the first quarter of 2022, the company reported revenues of $9.07 billion, up 8% from the year-ago quarter. Excluding the impact of unfavorable currency exchange rates, sales increased 10.2%. The top line also surpassed the consensus mark of $8.67 billion.

Arrow Electronics has been witnessing the increasing demand for electronic components and software, cloud and security solutions. However, supply-chain constraints have been limiting its ability to capitalize on the growing demand.

Arrow Electronics, Inc. Price, Consensus and EPS Surprise

Arrow Electronics, Inc. Price, Consensus and EPS Surprise

Arrow Electronics, Inc. price-consensus-eps-surprise-chart | Arrow Electronics, Inc. Quote

Segment Details

Adjusted revenues from Global Components increased 13.5% year over year to $7.2 billion. Region-wise, the segment’s revenues from America jumped 37.6% year over year. Adjusted sales from Europe increased 31.1% year over year. Global Components’ sales in the Asia Pacific region were down 7.6% on a year-over-year basis.

Adjusted revenues from Global Enterprise Computing Solutions (“ECS”) came in at $1.88 billion, down 0.9% year over year. Region-wise, the segment’s revenues from America fell 8.8%, while Europe’s revenues increased 11.4%.

The non-GAAP operating income from Global Components and Global ECS were $506 million and $88 million, respectively.

Margins

Arrow Electronics’ non-GAAP gross profit climbed 29.8% to $1.21 billion in the first quarter from the prior-year quarter’s $930.1 million. The non-GAAP gross margin expanded 220 basis points (bps) year over year to 13.3%.

The non-GAAP operating income surged 66.7% to $524.3 million in the January-March 2022 quarter from the year-ago quarter’s $314.5 million. The non-GAAP operating margin grew 200 bps to 5.8%.

Balance Sheet and Cash Flow

Arrow Electronics exited the first quarter with cash and cash equivalents of $242.8 million compared with the previous quarter’s $222.2 million.

The long-term debt was $2.79 billion, higher than $2.24 billion at the end of the fourth quarter of 2021.

The New York-based electronic components distributor used $200.2 million of cash for operating activities during the first quarter. In the first quarter of 2022, ARW returned $264.4 million worth of shares to its shareholders through the stock-repurchase program. It has $513 million remaining under its current share-repurchase authorization.

Guidance

For the second quarter of 2022, sales are estimated between $9.04 billion and $9.64 billion.

Global Components sales are projected in the range of $7.29-$7.59 billion. Global ECS sales are anticipated in the band of $1.75-$2.05 billion.

Interest expenses will presumably be about $36 million. As a result, the company projects non-GAAP earnings per share (EPS) in the range of $5.48-$5.64.

Arrow Electronics expects changes in foreign currencies to decrease second-quarter sales by approximately $300 million and EPS by 20 cents.

Zacks Rank & Stocks to Consider

Arrow Electronics currently carries a Zacks Rank #4 (Sell). Shares of ARW have rallied 5.9% in the past year.

Some better-ranked stocks from the broader technology sector are Semtech SMTC, Gogo GOGO and Analog Devices ADI. Semtech sports a Zacks Rank #1 (Strong Buy), while Gogo and Analog Devices each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Semtech’s first-quarter fiscal 2023 earnings has been revised to 76 cents per share from 70 cents over the past 60 days. For fiscal 2023, earnings estimates have moved north by 8% to $3.38 per share in the past 60 days.

Semtech’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 2.8%. Shares of SMTC have declined 3.7% in the past year.

The Zacks Consensus Estimate for Gogo’s second-quarter 2022 earnings has been revised upward by three cents to 15 cents per share over the past 90 days. For 2022, Gogo’s earnings estimates have moved south by two cents to 63 cents per share in the past seven days.

Gogo’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 65%. Shares of GOGO have soared 62.2% in the past year.

The Zacks Consensus Estimate for Analog Devices’ second-quarter fiscal 2022 earnings has been revised upward by 4 cents to $2.12 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 11 cents to $8.43 per share in the past 30 days.

Analog Devices’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have decreased 0.6% in the past year.

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