TD SYNNEX Corporation (NYSE: SNX) has reported mixed results for the second quarter of Fiscal 2022 (ended May 31, 2022). Its earnings per share surpassed the consensus estimate by 2.6%, while its sales lagged the estimate by 0.1%.
Shares of this $9.4-billion provider of IT services (including logistics, distribution, and integration services) lost 5.7% to close at 92.88 on Tuesday.
Quarterly Highlights
In the quarter, the company’s non-GAAP earnings were $2.72 per share, above the consensus estimate of $2.65 per share. On a year-over-year basis, the bottom line grew 30.1% on the back of healthy growth in sales and operating income.
Revenues stood at $15.27 billion, below the consensus estimate of $15.29 billion. However, the top line rose 160.7% year-over-year, driven by the synergistic impacts of the Tech Data merger. This merger was completed in September 2021.
In the quarter, the cost of revenue was $14,314 million, up 159% from the year-ago quarter. Also, adjusted selling, general and administrative expenses rose 267.3% to $584.9 million in the quarter.
Non-GAAP operating income jumped 134.4% from the year-ago quarter to $398.3 million, while margin declined 29 bps to 2.61%.
Exiting the second quarter, the company’s cash and cash equivalents were $521.5 million, down 47.5% from the end of Fiscal 2021. Long-term borrowings were $3,902.6 million, down 1.3% from the end of the previous year.
Projections
For Fiscal 2022 (ending November 2022), TD SYNNEX has maintained its non-GAAP earnings projections in the range of $11.15-$11.65 per share. The impact of unfavorable movements in foreign currencies are expected to be $0.14 per share on earnings.
For the third quarter (ending August 2022), the company forecast revenues of $14.5-$15.5 billion and non-GAAP earnings of $2.50-$2.90 per share. Consensus estimate for the same stands at $2.72 per share.
CEO’s Comment
TD SYNNEX’s CEO, Rich Hume, said, “We are making great strides as TD SYNNEX and seeing the fruits of our labor as we progress on our merger integration and strategic initiatives to grow across core and high-growth technologies.”
Cash Flow and Capital Deployment
The net flow from operating activities was $1,036 million in the second quarter, while free cash flow was $1,014.5 million. The company spent $29 million on share repurchases in the quarter.
Also, it announced to pay a quarterly cash dividend of $0.30 per share on July 29, 2022. All shareholders in the company’s record as of July 15, 2022, will be eligible to receive this dividend.
Stock Rating
On TipRanks, TD SYNNEX has a Moderate Buy consensus rating based on 2 Buys. SNX’s average price target of $126.50 reflects 36.2% upside potential from current levels. Over the past year, shares of SNX have decreased 24.2%.
Bloggers’ Stance
As per TipRanks, financial bloggers are 100% Bullish on SNX, as compared with the sector average of 65%.
Conclusion
As evident from its second-quarter results and projections, TD SYNNEX seems to be well-positioned to benefit from the Tech Data merger and its solid cash position in the quarters ahead. Also, its commitment to reward shareholders adds to its investment appeal. However, high costs and expenses, integration risks associated with the merger and forex woes raise concerns for the company.
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