Synnex
SNX
shares rallied 6.5% in the last trading session to close at $109.86. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock’s 19.8% gain over the past four weeks.
The upswing came after SYNNEX reported better-than-expected first-quarter fiscal 2021 results and announced a merger agreement with Tech Data Corporation. The company’s fiscal first-quarter non-GAAP earnings of $1.89 per share topped the Zacks Consensus Estimate of $1.63 and improved 33.1% year over year.
Revenues grew to $4.94 billion from the year-earlier quarter’s $4.08 billion. The top-line figure also beat the Zacks Consensus Estimate of $4.71 billion. The company’s quarterly results benefited from strong demand for its technology products and services as well as steady recovery in IT spending environment on the back of rapid digital transformation.
Separately, SYNNEX announced entering a merger agreement with Tech Data, wholly owned by funds managed by affiliates of Apollo Global Management, Inc., in a transaction worth $7.2 billion. Post the completion of transaction, SYNNEX shareholders are expected to own approximately 55% of the combined company while Apollo Funds will own 45% stake.
Furthermore, Non-GAAP earnings per share is expected to increase more than 25% in the first year after the close of the deal, with further accretion expected in the second year. Also, the combined company expects to generate net optimization and synergy benefits of $100 million in the first year after closing, and achieve at least $200 million by the end of the second year. These projections are encouraging investors.
Price and Consensus
This high-tech contractor is expected to post quarterly earnings of $1.70 per share in its upcoming report, which represents a year-over-year change of -47.9%. Revenues are expected to be $4.71 billion, down 10.5% from the year-ago quarter.
Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.
For Synnex, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock’s price usually doesn’t keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on SNX going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank 3 (Hold). You can see
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