Tech Data Corporation (TECD) beat Wall Street estimates for the third straight quarter in August and sees IT spending stabilizing in the Americas in the upcoming quarter. TECD trades at 14.9x forward earnings.

Company Description

Tech Data distributes technology products for more than 125,000 IT providers in 20 countries including the United States, Canada, Europe and Latin America. The company provides end user support to small and medium businesses, large companies and government agencies.

Tech Data Beats Big in the Second Quarter

On Aug 20, Tech Data reported second quarter results that surprised by 55.56% on the Zacks Consensus Estimate. Earnings per share were 70 cents compared to the Zacks Consensus Estimate of 45 cents. This was also better than the 42 cents per share reported in the second quarter of 2008.

Sales, however, continued to decline year over year, falling 15.9% to $5.2 billion form $6.2 billion. The stronger U.S. dollar negatively impacted sales by approximately 6% in the quarter. Sales declined in both the Americas and Europe due to a slowdown in tech spending because of the recession.

The company said that inventory management practices combined with sales execution enabled Tech Data to gain market share.

Third Quarter Sales Moderation

Tech Data expects third quarter net sales to decline year over year, as they have the previous quarters, but it projects some moderation in the decline compared to the first half of the year. The company sees some signs of stability in the Americas but believes demand in Europe may decline further.

Zacks Consensus Estimates Rise

Despite the continued decline in sales, covering analysts have gotten more optimistic in the last 30 days. The third quarter Zacks Consensus Estimate jumped 11 cents to 67 cents in the last month as all 8 analysts raised in that time period.

All of the covering analysts were equally as bullish on the full year, as the 2009 Zacks Consensus Estimate climbed 19.3% to $2.84 from $2.38 in the last 30 days. Analysts expect year over year earnings growth of 18.18%.

Value Fundamentals

Tech Data is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 1.07.

Zacks Investment Research
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