Arrow Electronics Hits 52-Week High - Analyst Blog

Shares of electronic component distributor Arrow Electronics ARW hit a new 52-week high of $58.12 on Friday, March 21, eventually closing at $57.40. The closing share price represents a one-year return of 44.18% and a modest year-to-date return of 8.86%.

Moreover, the company's share prices have increased 17.2% since the release of its fiscal fourth-quarter results on Feb 5. Arrow posted better-than-expected fourth-quarter results. Year-over-year comparisons were modestly up and the company had a favorable book-to-bill ratio. In addition, positive commentary about enhanced productivity, annual cost savings and continued higher contributions from Europe were encouraging.

Arrow's strong distribution channels are being preferred by original equipment manufacturers, contract manufacturers and commercial customers to market their products.  The company's core strength in providing best-in-class services and easy-to-acquire technologies will act as growth catalysts, going forward.

Moreover, the company has secured a significant market share through a broad portfolio of products and services and continued efforts to maximize consumer satisfaction. Additionally, incremental sales from the strategic acquisitions, such as Computerlinks, are expected to boost Arrow's top line, going forward.

It is worth noting that, spending on electronic equipments are dependent on the overall IT spending. Per the U.S. research firm Gartner, overall IT spending is expected to grow 3.1% in 2014. The improvement in spending will mostly be driven by enterprise software and IT services. As a specialized distributor of these products and services, Arrow Electronics stands to benefit from the projected increase.

Additionally, Arrow Electronics has provided an encouraging guidance. For the first quarter of 2014, the company expects sales to range between $5.1 billion and $5.5 billion. The Zacks Consensus Estimate is pegged at $5.32 billion.

Global components sales are projected between $3.3 billion and $3.5 billion. Global enterprise computing solutions sales are estimated within $1.8 to $2.0 billion. The company expects non-GAAP earnings to range between $1.14 and $1.26, while the Zacks Consensus is pegged at $1.21 per share.

However, a significant portion of the company's revenues comes from the sale of semiconductors, which is a cyclical industry characterized by changes in technology and manufacturing capacity and subject to significant market upturns and downturns. Moreover, the company's European exposure can adversely affect total revenue growth.

Moreover, competition from Avnet AVT and Ingram Micro IM are the concerns, going forward.

Currently, Arrow has a Zacks Rank #3 (Hold). Apart from Arrow, investors may consider Micron Technology MU that sports a Zacks Rank #1 (Strong Buy).