Avnet AVT reported better-than-expected second-quarter fiscal 2024 results. The company’s non-GAAP earnings were $1.40 per share, which surpassed the Zacks Consensus Estimate of $1.39. However, the reported figure came 30% lower than the year-ago quarter’s non-GAAP earnings of $2 per share, mainly due to lower revenues and the negative impact of 12 cents from higher interest expenses.

Revenues declined 7.6% year over year to $6.20 billion but slightly came ahead of the Zacks Consensus Estimate of $6.15 billion. The company’s top-line performance reflects a negative impact of weakened demand amid uncertain economic conditions and inventory correction measures adopted by customers.

During the second quarter, Avnet witnessed mixed demand across the diverse end markets it serves. The company pointed out that the defense and transportation markets continued to show relative strength, while demand in the industrial, consumer and communications verticals was relatively soft.

Avnet, Inc. Price, Consensus and EPS Surprise

Avnet, Inc. price-consensus-eps-surprise-chart | Avnet, Inc. Quote

Quarterly Details

The Electronic Components segment’s revenues were down 8% year over year to $5.81 billion as inventory levels for certain components still remain elevated, which is delaying inventory replenishment requirements. Our estimates for the Electronic Components segment’s revenues were pegged at $5.74 billion.

The Farnell segment’s revenues decreased 4% to $393 million. Our estimates for the Farnell segment’s revenues were pegged at $409.2 million. The decrease in the Farnell segment was mainly due to softness in demand along with the negative impact of the product mix and competitive pricing pressure.

Avnet reported a sales decline across all geographical regions. Revenues from America, Asia and the EMEA fell 6%, 10% and 6% year over year, respectively.

Avnet reported a gross profit of $706.2 million, down from the year-ago quarter’s gross profit of $784.1 million. The gross margin contracted 29 basis points (bps) year over year to 11.4%, primarily due to the lower gross margin at Farnell. Farnell’s gross margin declined due to the negative impacts of an unfavorable sales mix and competitive pricing pressures. Electronic Components’ gross margin was flat on a year-over-year basis.

The adjusted operating income came in at $242 million, which decreased 19% year over year. Adjusted operating income for the Electronic Components segment declined 16% to $248 million, while that for Farnell’s plunged 57% to $16 million. Avnet’s adjusted operating margin shrink 57 bps to 3.9%. Electronic Components’ adjusted operating margin contracted 43 bps to 4.3%, while Farnell’s declined 504 bps to 4%.