On Friday, Goldman Sachs maintained a Buy rating on TD Synnex (NYSE:SNX) with a steady price target of $144.00. The firm acknowledged TD Synnex's third fiscal quarter of 2024 earnings per share (EPS) surpassed expectations due to robust demand in the IT market, although margins fell short and the company's financial outlook was less optimistic than anticipated at the midpoint.
TD Synnex reported third fiscal quarter gross billings of $20.3 billion, marking a 9% increase year-over-year, with notable growth in both its Endpoint Solutions and Advanced Solutions portfolios. The company experienced a 23% year-over-year increase in billings for strategic technologies, including cloud, hyperscale infrastructure, and Hyve solutions. Despite a slower PC market recovery, TD Synnex anticipates a continued uptick in IT spending through the end of the year and into fiscal 2025, driven by a resurgence in PCs, normalization of networking demand, and momentum in AI infrastructure.
The company's gross margins, as a percentage of gross billings, declined by 44 basis points sequentially. This was attributed to initial investments in major Hyve customer partnerships, challenging comparisons from the previous year, and a shift in geographic mix toward Asia-Pacific and Europe, Middle East, and Africa regions. Despite this, TD Synnex's selling, general, and administrative expenses to gross profit percentage stood at 59.1%, with expectations for margin expansion through operational expenditure discipline and investments in automation.
For the fourth fiscal quarter of 2024, TD Synnex forecasted revenue in the range of $14.9 to $15.7 billion, versus a consensus of $15.1 billion, and an EPS outlook of $2.80 to $3.30, compared to a consensus of $3.22. This guidance suggests approximately 6% year-over-year revenue growth. Looking ahead into fiscal 2025,
Goldman Sachs projects an 8% increase in revenue growth for TD Synnex, bolstered by the anticipated recovery in PC sales and networking growth. Alongside improved gross margins, operational cost discipline, and share buybacks, the firm expects TD Synnex to achieve a 12% growth in EPS for fiscal 2025.
In other recent news, TD SYNNEX (NYSE:SNX), a major IT distributor, reported a solid third-quarter fiscal 2024 performance, disclosing a 9% year-over-year increase in gross billings to $20.3 billion. The firm's non-GAAP diluted earnings per share (EPS) were $2.86, marginally exceeding expectations. TD SYNNEX also highlighted its plans for revenue growth through geographical expansion, improved pricing, and margin management.
The company expects Q4 gross billings to range between $20.5 billion and $21.5 billion, with a projected non-GAAP diluted EPS of $2.80 to $3.30. TD SYNNEX aims to generate approximately $1 billion in free cash flow for the fiscal year, prioritizing returning excess cash to shareholders.
Despite concerns over working capital needs, particularly for the Hyve business, and slower than anticipated growth in the PC market, the company remains optimistic about the IT market recovery, especially in Europe and the Asia-Pacific region. TD SYNNEX also anticipates increased IT spending in Q4, which may impact working capital but is expected to yield positive returns in fiscal '25.
The company's "Destination AI" initiative, focusing on enhancing value across multiple technology categories, is part of its strategic growth plan.
InvestingPro Insights
As TD Synnex (NYSE:SNX) navigates the current IT market landscape, real-time data and insights from InvestingPro offer a deeper look into the company's financial health and market position. With a market capitalization of $10.14 billion, TD Synnex trades at a P/E ratio of 16.43, reflecting investor sentiment on its earnings potential. Adjusted figures for the last twelve months as of Q3 2024 show a lower P/E ratio of 13.2, suggesting a more favorable valuation when considering normalized earnings.
InvestingPro Tips highlight that TD Synnex has been actively returning value to shareholders, as evidenced by a high shareholder yield and a track record of raising its dividend for 4 consecutive years. This commitment to shareholder returns is further underscored by the company's history of maintaining dividend payments for 11 consecutive years. Additionally, the company's strong free cash flow yield, as implied by its valuation, supports the potential for continued investment in growth and shareholder distributions.
Despite some analysts revising their earnings expectations downwards for the upcoming period, TD Synnex's prominence as a key player in the Electronic Equipment, Instruments & Components industry cannot be overlooked. Investors seeking further insights can explore the additional 14 InvestingPro Tips available for TD Synnex, which provide a comprehensive analysis of the company's performance and market trends.
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