July 5, 2011 - Avnet, Inc. (AVT-NYSE), together with its subsidiaries, is the number distributor, based on sales, of electronic components, enterprise computer and storage products, and embedded subsystems worldwide. The company operates in two segments, Electronics Marketing and Technology Solutions.

The Technology Solutions division markets and sells mid-to high-end servers, data storage, and software products; and offers the services required to implement these products and solutions to the value-added reseller channel, original equipment manufacturers (OEM), independent software vendors, system builders, and system integrators.

It also provides logistics, financial, marketing, sales, and technical services, including engineering support, systems integration, and configurations. In addition, this segment offers technical design, integration, and assembly to developers of application-specific computing solutions in the non-PC market, including OEMs targeting the medical, telecommunications, industrial, and digital editing markets. The company was founded in 1955 and is headquartered in Phoenix, Arizona.

Earnings are about to astound. While the company saw a dip in 2009 to $1.92 a share, after $3.18 in 2008, last year, earnings bounced back to $2.77. This year, 12 analysts have a consensus of $4.26 (up 53.7%) for 2011. Next year, they forecast $4.51. The June quarter should show $1.16, up from 92 cents in last year's second period. Look for $1.04 in the third quarter vs 93 cents last year in the third.

Sales jumped as well after a downdraft in 2009. For the last three years, they were $17.953 billion, $16.23 billion, and $19.16 billion respectively. This year, 11 analysts see a rebound of 38.40% or $26.51 billion. Next year, they expect $28.17 billion. For the second quarter just ended, they predict $6.99 billion, up 34% over last year's $5.21 billion in the second. The company has thousands of customers, all over the globe which means it can withstand pockets of weakness as some economies sputter, keeping sales and earnings on a more even keel.

Part of the recent success has to do with hardware sales, in particular servers and storage devices. Companies are focusing more on upgrading these important elements of their IT programs at the expense of software. Hardware has been outselling software for the last 5 quarters, and analysts expect that trend to continue. Look for increased demand in these 2 products in Asia and Latin America as their growth will require more IT expenditures.

During the past decade, the company has employed an acquisitions strategy as part of its overall growth plan, and it will continue to do so, said Michelle Gorel, vice president of public relations, at the time of the purchase.

"You're going to continue to see us make acquisitions in high-growth areas in high-growth markets that fit our strategy," she said. "Right now, we're looking at Latin America and Asia, which are probably high-growth markets from a geographic standpoint, but then we also look at high-growth markets in terms of the technologies, the customer sets that are growing the fastest and the types of services that we want to provide."

Recently, the company bought Tallard, a distributor focused on customers throughout Latin America. The company generated $250 million in sales in 2009. In May the company expanded in Japan, offering to buy Unidux, Inc., a distrubutor that serves manufactureres in Japan. The deal should be completed by the end of this month.

Essential numbers: Market Cap is $4.9 billion. Trailing P/E is 8.65 while Forward P/E is 7.12. Price to book is 1.34. Book value is $24.45. Operating margin for the last 12 months was 3.80% and Profit margin was 2.30%. (Fiscal year ends July 3.) Return on equity was a respectable 16.92% and Return on assets was 6.94%. Total cash is $781.75 million for $5.12 a share. Total debt is $1.88 billion. Current ratio is 1.74. Beta is 1.55. In the last 52 weeks, the stock is higher by 30.60%. There are 152.78 million shares Outstanding. Float is 151.53 million. Insiders own .51% and Institutions have 92.70% of the Float. There is no dividend.

Most investors will like this story. Management is delivering good results after a tough economic recession that many other companies are still trying to recover from. New markets, new acquisitions and plenty of cash with good management suggest better days are ahead for investors in AVT. Just keep an eye on the IT cycle and the semiconductor cycle. AVT rides both of them.

- Company Web site: www.avnet.com

   Ted Allrich