SYNNEX (SNX) Q2 Earnings & Revenues Beat Estimates, Down Y/Y

SYNNEX SNX delivered non-GAAP earnings of $1.83 per share for second-quarter fiscal 2020, which fell 36% from the year-ago quarter. However, the figure beat the Zacks Consensus Estimate of 51 cents.

Revenues dropped to $5.53 billion from $5.72 billion in the year-ago quarter. The revenues beat the Zacks Consensus Estimate of $5.11 billion.

The lower-than-expected top-line performance was mainly due to the coronavirus outbreak, which disrupted the company’s operations.

Further, the company is moving toward its previous announcement of splitting SYNNEX Technology Solutions and Concentrix into two publicly-traded companies. Management believes that this strategic action would help add shareholder value and enhance the company's competitive edge. The transaction is expected to be completed in the second half of 2020.

SYNNEX Corporation Price, Consensus and EPS Surprise

SYNNEX Corporation Price, Consensus and EPS Surprise

SYNNEX Corporation price-consensus-eps-surprise-chart | SYNNEX Corporation Quote

Quarterly Details

SYNNEX’s Technology Solutions revenues decreased 2% year over year to $4.5 billion.

Concentrix business revenues decreased 8% year over year to $1.1 billion. Foreign exchange headwinds impacted revenues of this segment by 2%.

In the reported quarter, non-GAAP operating income was down 33.8% to $161.5 million. Also, non-GAAP operating margin contracted 134 basis points (bps) on a year-over-year basis to 2.92%.

Non-GAAP operating income for Technology Solutions was $98 million, down 21% from the year-ago quarter. COVID-19-related additional expenses of approximately $37 million for the Technology Solutions segment, including an increase in the allowance for doubtful accounts and staffing costs, was an overhang.

For the Concentrix segment, non-GAAP operating income was $63 million, falling 47% year over year, primarily due to the COVID-19-related additional expenses of $52 million.

Balance Sheet & Cash Flow

SYNNEX ended the fiscal first quarter with cash and cash equivalents of nearly $1.11 billion compared with $296.2 million at the end of first-quarter fiscal 2020.

The company’s board of directors has approved a share repurchase program of up to $400 million of its common stock for up to three years. This will come into effect from Jul 1, replacing the previous three-year program.

Guidance

For the third quarter of fiscal 2020, revenues are expected between $5.5 billion and $5.9 billion.

Non-GAAP net income is expected to be in the range of $103.9-$129.9 million. Moreover, the company also expects non-GAAP earnings between $2 and $2.50 per share.

Zacks Rank & Other Stocks to Consider

SYNNEX currently carries a Zacks Rank #1 (Strong Buy).

A few other similar-ranked stocks in the broader technology sector are Mercury Systems Inc MRCY, Fortinet, Inc. FTNT and Baozun Inc. BZUN. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Mercury, Fortinet and Baozun is currently pegged at 15.72%, 14% and 29%, respectively.

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