Avnet AVT has entered fiscal 2027 with strong momentum, marking the fourth consecutive quarter of margin expansion. In the fourth quarter of fiscal 2026, AVT’s sales surged 47.7% year over year to a record $8.3 billion, while adjusted operating income jumped 122% to $318 million. Avnet’s adjusted operating margin expanded 129 basis points year over year and 73 basis points sequentially to 3.8%.
The improvement in operating profitability is notable because gross-margin expansion was limited. Avnet reported a 10.4% gross margin in the quarter, while SG&A was $548 million. More importantly, SG&A represented 63.3% of gross profit compared with 70.2% in the third quarter and 76% in the year-ago period. This indicates that a greater portion of incremental gross profit is flowing through to operating income as sales volumes recover.
Avnet’s sales environment also provides support for the outlook. Avnet reported year-over-year growth across the Americas, EMEA and Asia. Electronic Components revenues increased 49% to $7.8 billion, while Farnell sales rose 29.4% to $500.1 million. The respective operating margins reached 4.1% and 9%, highlighting continued improvement across both businesses.
AVT is experiencing growth across data center, networking, aerospace and defense, and industrial. AVT’s book-to-bill ratios remained above parity in all regions. The company expects first-quarter sales of $9-$9.3 billion and adjusted diluted EPS of $2.80-$2.90. At the midpoint, the sales forecast represents approximately 10% sequential growth and assumes expansion across all Electronic Components regions and Farnell.
How Competitors Fare Against AVT
AVT competes with global component distributors as well as broader IT distributors, including Arrow Electronics ARW and TD SYNNEX SNX. However, AVT has created a niche for itself in the electronics distribution space, giving it an edge.
Arrow Electronics competes head-to-head with Avnet in electronic component distribution, semiconductor supply, embedded computing and engineering services. Both Arrow Electronics and Avnet serve OEMs, industrial manufacturers, automotive suppliers, communications equipment vendors and data center customers. Avnet comes to a crossroads with TD SYNNEX as they form part of the AI infrastructure value chain.
AVT’s Price Performance, Valuation and Estimates
Avnet rose 107.1% year to date, outperforming the Zacks Electronics - Parts Distribution industry and Zacks Computer and Technology sector’s return of 75.3% and 22.5%, respectively.
AVT YTD Performance Chart
Image Source: Zacks Investment Research
Despite this outperformance, AVT stock is trading at a price-to-sales multiple of 0.24X, which is below the industry’s P/S multiple of 0.37X. The undervaluation is further substantiated by a Zacks Value Score of B.
AVT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
For the first quarter of fiscal 2027, Avnet expects adjusted earnings per share between $2.80 and $2.90. The Zacks Consensus Estimate for Avnet’s earnings suggests growth of 241% year over year. Estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
AVT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Avnet, Inc. (AVT): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).