AVT Q4 Earnings Call Highlights Broad Demand Recovery

AVT Guides for Another Step-Up

Chief financial officer Ken Jacobson guided first-quarter fiscal 2027 sales to $9.0-$9.3 billion and adjusted earnings to $2.80-$2.90 per share. The sales midpoint implies approximately 10% sequential growth.

The outlook assumes growth across all Electronic Components regions and Farnell, similar interest expense, a 21-25% tax rate and 85 million diluted shares. Jacobson said pricing contributes only modestly, leaving units and mix as the main drivers.

Chief executive officer Phil Gallagher said regional book-to-bill ratios are solidly above 1 and backlog extends well into fiscal 2027. He called December healthy, while Jacobson said it could exceed normal seasonality without double-digit sequential growth.

Avnet Sees a Broadening Recovery

Gallagher said AI remains a catalyst, but improvement now spans industrial, transportation, aerospace and defense, networking, and data center markets. Every Electronic Components region and Farnell grew sequentially and year over year.

Avnet also sees edge AI lifting demand for sensing, connectivity, embedded computing, power and thermal management in robotics, drones and autonomous systems. Gallagher linked that opportunity to engineering support and global supply-chain capabilities.

The Americas grew fastest, but Gallagher said the advance was not mainly a data center story. Industrial and aerospace and defense led, while transportation and communications also improved.

AVT Converts Volume Into Margin

Jacobson said adjusted operating margin reached 3.8%, up 73 basis points sequentially, as adjusted operating income grew roughly 2.6 times sales. SG&A fell to 63% of gross profit from 70% in the prior quarter.

Electronic Components operating margin reached 4.1%, its highest in more than two years. Farnell reached 9.0%, its best in more than three years, and remains targeted for double digits before fiscal 2027 ends.

Management continues to target progress toward a 5% company operating margin. Jacobson said Electronic Components gross-margin gains depend partly on regional mix as Asia stays strong and the more profitable Western regions recover.

Avnet Addresses Pricing and Inventory

Answering a Wells Fargo analyst, Gallagher said non-memory supplier price increases are broadening but remain smaller than memory increases. Avnet generally passes them through without extra markup, supporting gross profit dollars more than margin percentage.

Jacobson said memory pricing generated about one-third of both year-over-year and sequential revenue growth, plus roughly one-third of gross-profit-dollar growth. The first-quarter outlook includes only modest pricing.

Inventory days improved to 71, including less than 65 for Electronic Components. Jacobson called inventory healthy and said faster turns support investment as lead times extend. More than half of the $600 million inventory increase reflected pricing, substantially all memory.

AVT Sees More Runway in the Cycle

A Truist Securities analyst pressed on cycle timing. Gallagher placed the recovery around the third or fourth inning based on bookings, backlog and customer discussions, rather than near a late-cycle peak.

A Bank of America analyst asked whether orders reflected precautionary buying or consumption. Jacobson said some large customers seek safety stocks, but indicators show no significant inventory accumulation, while supply constraints limit memory availability.

Gallagher added that Avnet challenges abrupt forecast spikes, works with suppliers to screen for double bookings and monitors cancellations. Management said those signals align with field forecasts and the guidance range.

Avnet Enters Fiscal 2027 With Discipline

Management paired confidence in demand with continued working-capital and expense control. Jacobson expects SG&A to fall below 60% of gross profit before fiscal 2027 ends and near-term earnings growth to run about three times sales growth.

Capital allocation will prioritize funding accelerating growth and supporting the dividend. Avnet ended the quarter at 3.2 times gross leverage and expects approximately 3 times by calendar year-end while supporting higher receivables and inventory.

AVT's Zacks Signals Remain Mixed

AVT carries a Zacks Rank #3 (Hold) at present. Its Value Score of A and Momentum Score of B are favorable, while its Growth Score of D is weaker. The VGM Score of B reflects a favorable combined profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Style Scores complement the Zacks Rank, and a Hold can still carry stronger grades. AVT's setup is balanced rather than uniformly positive. The Zacks Rank can change as analysts revise estimates after the just-reported results.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research