Earnings Estimates Scorecard: ARW – Analyst Blog

Estimates have inched up slightly for New York based electronic components and computing products distributor Arrow Electronics (ARW) in the past few days.

 

Last week, Arrow Electronics entered into an agreement to acquire reverse logistics services provider Converge and parts catalog retailer Verical Inc. The acquisitions are expected to be accretive to earnings by 5 to 10 cents per share on an annual basis once the Converge deal is closed.

 

Converge offers a full suite of reverse supply chain solutions that are adopted by top-tier OEMs. Management stated that reverse logistics is developing rapidly and this acquisition builds on Arrow’s global capabilities as a supply chain and logistics expert.

 

Verical runs an ecommerce marketplace facilitating the purchase and sale of electronic components.

 

 

For 2010, two out of the eleven analysts following the stock have raised their estimates in the last 30 days and one in the last seven days. There were no revisions in the opposite direction.
For 2011, three out of the eleven analysts covering the stock have raised their estimates in the last 30 days and two in the last seven days.

 

For the quarter (ending March), one out of the ten analysts covering the stock have raised their estimates with no revision in the opposite direction.

 

For the second quarter (ending June), two analysts have raised their estimates in the last 30 days and two in the last seven days.

 

 

Estimates have inched up slightly in the last seven days. The current Zacks Consensus Estimate for 2010 is $2.42, up one cent in the last seven days, with an upside potential of 11.83%.
For 2011, the current Zacks Consensus Estimate is $2.98, up three cents in the last seven days, with an upside potential of 8.39%.

 

Arrow has consistently exceeded expectations. In terms of earnings surprises, earnings exceeded the Zacks Consensus Estimate in the last quarter by 4.92%, and by 12.12% in the first quarter. On average, earnings have exceeded expectations by 7.46% in the past four quarters.
The current Zacks Consensus Estimate for the third quarter is 58 cents, with an upside potential of 8.62%.
Arrow Should Outperform

 

2009 was a challenging year for the company amidst an acute recessionary environment. Management earlier stated that since the current recession was more broad-based and deeper than expected, the industry still has some recovering to do before revenues return to the levels seen prior to the downturn.

 

Nevertheless, fourth quarter results have beaten expectations and the economy continues to show signs of revival. IT spending is expected to pick up in 2010 gathering momentum in 2011. Overall demand should improve leading to top-line growth, which in turn should boost the bottom line as well.

 

We have an “Outperform” rating on the stock, which is supported by a Zacks #2 Rank.