Core Viewpoint - Avnet (AVT) is currently rated as a Zacks Rank 5 (Strong Sell) despite having recently surpassed the Zacks Consensus Estimate for earnings [1] Company Overview - Avnet, Inc. specializes in the distribution and sale of electronic components, operating through two segments: Electronic Components and Farnell [2] - The Electronic Components segment focuses on marketing and selling semiconductors, interconnects, passive and electromechanical devices, and integrated components [2] - The Farnell segment is dedicated to distributing electronic components and related products to the electronic system design community through multi-channel sales and marketing resources [2] - Founded in 1921 by Charles Avnet, the company is headquartered in Phoenix, AZ [2] Earnings History - Avnet has beaten the Zacks Consensus Estimate in three of the last four quarters, indicating some level of management effectiveness in meeting market expectations [4] - The most recent quarter reported an EPS of $0.84, exceeding the consensus estimate of $0.81 [4] Earnings Estimates - Recent trends show a decline in annual earnings estimates for Avnet, with the current fiscal year consensus dropping from $4.61 to $4.36 over the last 90 days [5] - The next fiscal year's estimate has also decreased from $6.68 to $6.50 in the same timeframe [5] - The negative movement in earnings estimates is a significant factor contributing to Avnet's Zacks Rank of 5 (Strong Sell) [5] Market Context - A broader trend within the Zacks universe indicates that many stocks are experiencing negative earnings estimate revisions, leading to a decline in their rankings [6]

Financial Performance - Sales for the first quarter of fiscal 2026 were $5.90 billion, an increase of $294.4 million, or 5.3%, compared to $5.60 billion in the same quarter last year[91] - Adjusted operating income for the first quarter of fiscal 2026 was $150.7 million, a decrease of $18.3 million, or 10.8%, from $168.9 million in the first quarter of fiscal 2025[101] - The gross profit margin decreased by 42 basis points to 10.4% for the first quarter of fiscal 2026 compared to 10.8% in the first quarter of fiscal 2025[95] - SG&A expenses increased by $25.7 million, or 5.9%, from the first quarter of fiscal 2025, representing 7.9% of sales[97] - Operating income for the first quarter of fiscal 2026 was $142.0 million, a decrease of $0.2 million, or 0.1%, year over year[101] - The effective tax rate for the first quarter of fiscal 2026 was 32.6%, compared to 21.1% in the first quarter of fiscal 2025[105] - The Company's net income for Q1 fiscal 2026 was $51.7 million, or $0.61 per share, down from $59.0 million, or $0.66 per share in Q1 fiscal 2025, reflecting a 5.5% reduction in diluted shares outstanding due to share repurchases[106] Sales and Revenue - EC sales for the first quarter of fiscal 2026 were $5.50 billion, an increase of $242.6 million, or 4.6%, from the prior year[92] - Farnell sales for the first quarter of fiscal 2026 were $398.9 million, reflecting an increase of $51.8 million, or 14.9%, compared to the same period in the prior year[93] - The Company expects sales in the second quarter of fiscal 2026 to increase approximately 2% compared to first quarter sales of fiscal 2026[86] Cash Flow and Operating Activities - Net cash used for operating activities increased by $250.9 million year-over-year to $144.6 million in Q1 fiscal 2026, primarily due to cash used for working capital, which was $217.5 million compared to $0.8 million generated in Q1 fiscal 2025[108] - The Company generated $473.6 million in cash flows from operating activities over the trailing four fiscal quarters ended September 27, 2025[116] Debt and Financing - The Company reported net proceeds of debt totaling $320.8 million in Q1 fiscal 2026, including $633.8 million from Convertible Notes issuance, compared to $15.7 million in the same period of the prior fiscal year[109] - As of September 27, 2025, the Company had a total borrowing capacity of $2.0 billion under the Credit Facility and Securitization Program, with approximately $1.68 billion of total committed availability[119] - Approximately 77% of the Company's debt bears interest at a fixed rate, and a hypothetical 1.0% increase in interest rates would result in a $1.7 million decrease in income before income taxes for Q1 fiscal 2026[128] Shareholder Returns - Cash dividends paid during Q1 fiscal 2026 were $0.35 per share, totaling $28.5 million, slightly down from $0.33 per share, or $28.9 million in Q1 fiscal 2025[123] - The Company repurchased $138.3 million of common stock in Q1 fiscal 2026, compared to $100.0 million in the same period of the prior fiscal year[109] - The Company does not expect to repurchase additional shares until its consolidated leverage ratio returns to historical levels, with $225.8 million of share repurchase capacity remaining[122] Interest and Expenses - Interest and other financing expenses in the first quarter of fiscal 2026 were $59.8 million, a decrease of $4.7 million compared to $64.4 million in the first quarter of fiscal 2025[103] - The Company held cash and cash equivalents of $175.5 million as of September 27, 2025, down from $192.4 million as of June 28, 2025[115]

Core Insights - Avnet, Inc. reported better-than-expected first-quarter results for fiscal 2026, with earnings of 84 cents per share, exceeding the Zacks Consensus Estimate by 3.7%, although this represented an 8.7% decline year-over-year [1][9] - Net sales increased by 5.3% year-over-year to $5.9 billion, surpassing the consensus mark by 3.5%, driven by strong performance across operating segments [1][9] Financial Performance - The Electronic Components segment's revenues rose 4.6% year-over-year and 5.1% sequentially to $5.5 billion, exceeding estimates of $5.34 billion [3] - Farnell sales surged 14.9% year-over-year and 3.2% sequentially to $398.9 million, outperforming the estimate of $360.4 million [3] - Adjusted operating income was $150.7 million, down 10.8% year-over-year, with the Electronic Components segment's income declining 19.5% to $159 million, while Farnell's income increased ninefold to $17.1 million [4] Regional Sales Performance - Year-over-year sales increased 9.9% in Asia to $2.86 billion and 3% in the Americas to $1.37 billion, while EMEA sales slightly declined by 0.1% to $1.67 billion [4] Operating Margins - Avnet's adjusted operating margin decreased by 46 basis points to 2.6% from the previous year, with the Electronic Components segment's margin contracting by 86 basis points to 2.9%, while Farnell's margin improved by 375 basis points to 4.3% [5] Balance Sheet and Cash Flow - As of September 27, 2025, Avnet had cash and cash equivalents of $175.5 million, down from $192.4 million as of June 28, 2025, with long-term debt at $2.79 billion [6] - The company utilized $144.6 million in cash for operational activities during the quarter and repurchased approximately $138.3 million in shares while paying $28.5 million in dividends [6] Q2 Guidance - For the second quarter of fiscal 2026, Avnet expects revenues between $5.85 billion and $6.15 billion, with a midpoint of $6 billion, indicating a year-over-year increase of 1.8% [7] - Non-GAAP earnings are anticipated to be between 90 cents and $1 per share, while the consensus estimate is $1.01, suggesting a year-over-year increase of 16.1% [7]

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Core Insights - Amplifon, the Italian hearing aid group, experienced a significant decline in its third-quarter adjusted net profit, reporting a 27.7% drop to 19.2 million euros ($22.4 million) [1] Financial Performance - The adjusted net profit for the third quarter was 19.2 million euros, which translates to approximately $22.4 million [1] - The reported decline of 27.7% indicates a substantial decrease in profitability compared to the previous year [1]

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Financial Data and Key Metrics Changes - The company achieved sales of $5.9 billion in the first quarter, exceeding guidance and reflecting a 5% increase year-over-year and sequentially [4][10] - Adjusted EPS was $0.84, near the high end of guidance [4] - Gross margin for the quarter was 10.4%, down 42 basis points year-over-year and 15 basis points sequentially [10][11] - Adjusted operating income was $151 million, with an adjusted operating margin of 2.6% [12] Business Line Data and Key Metrics Changes - Electronic components sales increased by 5% year-over-year and sequentially [10][12] - Farnell sales grew by 50% year-over-year and 3% sequentially [10][12] - The Americas region showed year-over-year sales growth for the first time since fiscal 2023, while EMEA sales were flat year-over-year [4][10] Market Data and Key Metrics Changes - Sales in Asia grew by 10% year-over-year, now representing over half of electronic components sales [10][11] - EMEA sales were flat year-over-year and down 6% in constant currency [10] - The book-to-bill ratio improved globally, with all regions above parity [5] Company Strategy and Development Direction - The company is focused on balancing growth opportunities with inventory reductions and optimizing existing inventory [5][14] - There is an emphasis on strengthening supplier relationships and navigating market complexities [9] - The company aims to reduce leverage to approximately 3.0 times over the next year while maintaining a strong balance sheet [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery in Asia and progress in the Americas, with stabilizing conditions in EMEA [8][9] - Geopolitical and market uncertainties remain, but the company believes its diverse customer base positions it well for recovery [8] - The company anticipates modest growth in the December quarter, particularly in Europe [31] Other Important Information - The company increased its quarterly dividend by approximately 6% to $0.35 per share [16] - The company repurchased approximately 2.6 million shares totaling $138 million during the quarter [16] Q&A Session Summary Question: Exposure to AI applications in data centers - Management indicated that exposure to hyperscalers is relatively small, around 7% of Asia's business, with opportunities in storage, connectivity, and power [19][20] Question: Inventory days and cash flow - Management acknowledged that inventory days were flattish and indicated a trend of declines in the electronic components business, with expectations to improve inventory days over time [21][24][25] Question: Demand profile in EMEA for December quarter - Management expects modest growth in Europe, indicating that bookings have been positive for a couple of quarters [31] Question: Incremental margins and geographic mix - Management noted that the return to year-over-year growth in total business should provide operating leverage and expand operating margins [32][34] Question: Potential price increases from suppliers - Management mentioned that certain technologies are seeing potential price increases, particularly in memory and interconnect products [36][37] Question: Core segment margins and future expectations - Management indicated that achieving core margins above 4% in fiscal 2026 is possible depending on mix shifts and seasonal impacts [40][42] Question: Farnell margins and revenue impacts - Management stated that Farnell margins could continue to grow, depending on product mix and market recovery [43][44] Question: Demand creation revenues and IP&E margins - Management provided that IP&E accounts for 15%-20% of total components business, with demand creation contributing 28%-33% [46]

Financial Data and Key Metrics Changes - The company achieved sales of $5.9 billion in the first quarter, exceeding guidance and reflecting a 5% increase year-over-year and sequentially [4][10] - Adjusted EPS was $0.84, near the high end of guidance [4] - Gross margin for the quarter was 10.4%, down 42 basis points year-over-year and 15 basis points sequentially [10][11] - Adjusted operating income was $151 million, with an adjusted operating margin of 2.6% [12] Business Line Data and Key Metrics Changes - Electronic components sales increased by 5% year-over-year and sequentially, driven by demand in Asia and the Americas [10][11] - Farnell sales grew by 50% year-over-year and 3% sequentially, with stable operating margins [10][11][12] - The IP&E segment showed steady sales with improving margins, particularly in Asia [7] Market Data and Key Metrics Changes - Sales in Asia grew by 10% year-over-year, representing over half of electronic components sales [10][11] - The Americas region saw a 3% year-over-year increase in sales, marking the first growth since fiscal 2023 [4][10] - EMEA sales were flat year-over-year and down 6% in constant currency [10] Company Strategy and Development Direction - The company is focused on balancing growth opportunities with inventory optimization [5][14] - There is an emphasis on enhancing digital capabilities and leveraging the core ecosystem for new opportunities, particularly in Farnell [7] - The company aims to reduce leverage to approximately 3.0 times over the next year while maintaining a strong balance sheet [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery in Asia and progress in the Americas, with stabilizing conditions in EMEA [8][9] - There are positive signs from supplier partners regarding lead times and potential price increases, indicating a strengthening market [9][33] - The company anticipates modest growth in the December quarter, particularly in Europe, as bookings have improved [29] Other Important Information - The company increased its quarterly dividend by approximately 6% to $0.35 per share [16] - The company repurchased approximately 2.6 million shares, totaling $138 million, representing 3% of outstanding shares in the first quarter [16] Q&A Session Summary Question: Exposure to AI applications in data centers - Management indicated that exposure to hyperscalers is relatively small, around 7% of Asia-Pac business, with opportunities in storage, connectivity, and power [19][20] Question: Inventory days and cash flow expectations - Management noted that inventory days decreased slightly, with expectations for further declines as sales grow [21][22][24] Question: Demand profile for EMEA in December quarter - Management expects modest growth in EMEA, indicating that the region is hitting the bottom after a tough period [29] Question: Incremental margins and operating leverage - Management indicated that the return to year-over-year growth in total business should provide operating leverage and expand margins [30][31] Question: Potential price increases from suppliers - Management noted that certain technologies are seeing potential price increases, particularly in memory and interconnect products [32][33] Question: Core segment margins and future expectations - Management expressed cautious optimism about achieving core margins above 4% in fiscal 2026, depending on mix shifts and market recovery [38][39] Question: Farnell margins and revenue impacts - Management indicated that Farnell margins could continue to grow, but product mix will play a significant role [41][43]

Financial Performance - Q1 FY26 - Revenue reached $5.9 billion, a 5% year-over-year increase[11] - Adjusted operating margin was 2.6%[11], a decrease of 46 bps year-over-year[17] - Adjusted diluted EPS was $0.84, a 9% decrease year-over-year[11, 20] - SG&A expenses as a percentage of gross profit increased to 75.6% from 72.2% in Q1 FY25[13, 14] Regional and Segment Performance - Asia accounted for 49% of revenue[12], with a 10% year-over-year growth in constant currency[12] - Americas showed a 3% year-over-year revenue growth in constant currency[12] - EMEA region's revenue was flat year-over-year, but decreased by 6% in constant currency[7, 12] - Electronic Components segment revenue was $5.5 billion, a 5% increase year-over-year[12] - Farnell segment revenue was $399 million, a 15% increase year-over-year[12] Balance Sheet and Liquidity - Inventory was $5.4 billion, an increase of $185 million quarter-over-quarter[22] Outlook for Q2 FY26 - Sales are projected to be between $5.85 billion and $6.15 billion, with a midpoint of $6.00 billion[23] - Adjusted diluted EPS is expected to be between $0.90 and $1.00, with a midpoint of $0.95[23]

Core Insights - Avnet reported revenue of $5.9 billion for the quarter ended September 2025, reflecting a year-over-year increase of 5.3% and surpassing the Zacks Consensus Estimate of $5.7 billion by 3.46% [1] - The company's EPS was $0.84, down from $0.92 in the same quarter last year, but exceeded the consensus estimate of $0.81 by 3.7% [1] Revenue Performance - Sales from Farnell reached $398.9 million, exceeding the average estimate of $378.96 million by analysts, marking a year-over-year increase of 14.9% [4] - Sales from Electronic Components were $5.5 billion, surpassing the estimated $5.32 billion and showing a 4.6% increase compared to the previous year [4] Operating Income - Operating income for Electronic Components was reported at $159 million, below the average estimate of $173.03 million [4] - Farnell's operating income was $17.1 million, exceeding the estimated $15.09 million [4] - Corporate expenses showed a loss of $25.4 million, slightly better than the average estimate of $26.48 million [4] Stock Performance - Avnet's shares have returned -3.3% over the past month, contrasting with the Zacks S&P 500 composite's increase of 3.8% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]