Avnet, Inc. (AVT) is one of the world’s largest distributors of electronic components and computer products. The company continues to expand business in Asia, which is associated with lower ASPs and also lower costs.
While other factors may help margin expansion, a larger percentage of Asian revenue in the mix enhances Avnet’s basic low-margin profile. Given the early signs of recovery, IT spending is expected to pick up. Although the recovery would be slow and steady, orders are expected to return to normal levels by the end of calendar 2010.
The recent acquisition of Bell Microproducts should further expand the scale of operations and provide cross-selling opportunities. We upgrade our recommendation for Avnet to Outperform from Neutral.Zacks Investment Research
