Bull Of The Day: Avnet

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Avnet (AVT - Free Report) is a Zacks Rank #1 (Strong Buy) that recently reported a strong quarter and has been moving higher ever since. Just what were the details of the report and how did the outlook change for this electronic parts distributor? Let’s explore more about this stock in this Bull Of The Day article.
 

Description

Avnet, Inc. is a distributor of electronic components headquartered in Phoenix, Arizona, named after Charles Avnet, who founded the company in 1921. After its start on Manhattan's Radio Row, the company became incorporated in 1955 and began trading on the New York Stock Exchange in 1961.
 

Most Recent Earnings Report

I see the most recent earnings report was a huge beat. The company posted $2.15 in EPS when Wall Street was looking for $1.51. That 64-cent difference translates to a positive earnings surprise of 42%.

Following the report, analysts that cover this stock raised their earnings estimates for the next two quarters as well as for the full year and the next full year as well.
 

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

For AVT, I see four straight quarters where the company beat of the Zacks Consensus Estimate. That is always good to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).

The average positive earnings surprise over the course of the last year works out to be 20%.
 

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher. For AVT, I see annual estimates moving higher.

Over the last 60 days, I see a few increases.

The full fiscal year 2022 has moved from $5.67 to $6.83.

Next year has also increased from $5.64 to $6.99.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).
 

Valuation

I see a great valuation for Avnet. The forward PE is 7.2x and that is very low considering the 32% topline growth the company posted in the most recent quarter. The price to book 1.1x is very low given the growth in earnings. The price to sales comes in at 0.2x, which is low and indicates that the market does not value each sales dollar all that highly. Margins have seen a steady increase over the last three quarters, moving from 1.76% to 2.14% and then most recently clocking in at 2.6%.
 

Chart

Avnet, Inc. Price, Consensus, and EPS Surprise

Avnet, Inc. Price, Consensus and EPS Surprise

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