Goldman Upgrades Avnet, Removes From Sell List

Goldman Sachs' Mark Delaney upgraded

from Sell to Neutral with a price target of $41.00. The rating change came after Goldman saw "more limited downside to Street estimates." In comparison to the median of peers, Avnet has been down 26% since November 13th, 2014 largely due to analyst downgrades said Delaney. "Avnet's underperformance seems driven by reductions to Street estimates, as CY16 consensus EPS has been revised down 20%... and Avnet's results/guidance on an operating basis have been below the Street the last two quarters" said the analyst. Delaney appreciated Avnet's recent announcement to become "exclusive distributor for Broadcom/Avago in NA and Europe." The expansion can add up to $500 million to revenue and 5% to EPS "over the intermediate to long term" said the analyst. Additionally, volume is relatively high for Avnet's industry compared to last year which creates a "favorable" environment for the company. "ISM new orders index remains in the mid-50s (a good barometer for component sales historically; we estimate the ISM likely needs to average only in the low 50s in 2HCY16 for Avnet to meet our estimates)" said the analyst. At the time of writing, Avnet was trading at $41.23.