On Tuesday, the international wholesale distributor of technology products and services reduced its first-quarter earnings forecast to between $22 million and $27 million, or 15 cents to 18 cents per share. Analysts surveyed by earnings tracking firm First Call produced a consensus forecast of 32 cents per share for Ingram Micro's quarter ended Dec. 30.
The U.S. slowdown in technology buying is affecting the company's sales, Ingram Micro executives said Wednesday during a conference call with analysts.
"The softness that we began to see in December...has intensified," said CEO Kent B. Foster. "The decline in technology demand has been significant and rapid."
No one should be surprised by lower projections from Ingram Micro, said Brian Alexander, analyst with Raymond James & Associates. "But my gut feeling is that the magnitude (of the reduction) is more than what we would have expected," said Alexander, whose firm has a "strong buy" rating on the stock.
Ingram Micro, based in Santa Ana, Calif., topped the consensus forecast by a penny in the fourth quarter and severely cut first-quarter earnings expectations.
After market close Wednesday, the company reported fiscal fourth-quarter net income of $57.9 million, or 39 cents per share. Analyst consensus predicted a profit of 38 cents per share, according to First Call.
Fourth-quarter sales of $8.07 billion represented a year-over-year gain of 3 percent, or 8 percent if the effects of the weak Euro are discounted. U.S. sales rose 7 percent year over year to $4.66 billion. European sales fell 10 percent year over year to $2.11 billion, but would have gained 5 percent if not for currency weakness. Sales outside the United States and Europe gained 15 percent to $1.29 billion.
Company executives touted their continuing profitability gains. Ingram Micro's gross margin rose to 5.46 percent, from 5.43 percent in the third quarter. For the full year, Ingram Micro's gross margin rose 0.076 percent.
"By far our greatest achievement for the quarter and throughout the year was gross margin improvement," Foster said.
Ingram Micro and Tech Data, the two largest technology distributors in the world, last year reversed a trend of falling prices in the distribution industry, Alexander said, "and the higher prices stuck."
Now that gross margins have risen, the company will turn to cutting operating costs in 2001, Foster said. The company declined to forecast earnings and revenue past the first quarter. "Beyond the first quarter, I'm just very reluctant to give guidance until we get a better look at the world," company President Michael Grainger told analysts.
Shares of Ingram Micro fell 40 cents to $13.80 in Wednesday's regular trading ahead of the release of quarterly results. Although Ingram Micro may have cut first-quarter forecasts more than some anticipated, that shouldn't hurt the stock much, Alexander said. "It's already inexpensive, so I don't see much downside," he said.