Companies expect to boost their IT budgets in the coming year, a bullish signal for distributor Tech Data (TECD), notes growth stock expert Richard Moroney, editor of the specialized small cap advisory, Upside.
Since 2003, Goldman Sachs has surveyed the spending plans of chief information officers, and the December reading was its highest on record.
A wholesale distributor, Tech Data supplies hundreds of thousands of technology products, such as printer equipment, mobile devices, virtualization software and data-center servers.
In the past couple years Tech Data has revamped its business by selling off underperforming operations in South America in 2016 and completing a $2.67 billion deal in February to broaden its services portfolio.
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October-quarter earnings per share were $2.00, up 39% and $0.08 above the consensus. Aided by acquisitions, revenue jumped 41% and topped expectations.
Gross profit margin rose nearly a percentage point to 5.8%. For the January quarter, management targets sales of $10.3 billion to $10.8 billion, bracketing the consensus of $10.6 billion.
Per-share profits should range from $3.35 to $3.65, up from $2.45 a year earlier. The midpoint of $3.50 per share is well above the consensus estimate of $3.38. Tech Data rallied on the solid showing and is rated Best Buy.
Richard Moroney is editor of Upside.
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