Stifel Nicolaus Upgrading Avnet To Buy

In a report published by Stifel Nicolaus, Avnet AVT is being upgrade from Hold to Buy.

Stifel Nicolaus said that it is upgrading its investment rating on shares of Avnet to Buy from Hold, as it believes the distributors earnings power over the next year or two should be sustainable due to market fundamentals as well as the company's successful M&A strategy. “Although we had previously expected a pronounced supply or inventory correction in the electronic component space we now do not see that play out due to a disciplined approach to capacity and inventory by suppliers and their customers, as well as strong underlying end demand. We also expect IT spending (tied to 40% of Avnet's sales) to hold up, particularly in the enterprise computing and storage space. We also note that while Avnet has done eight M&A transactions in the last 12 months, we believe certain key markets (particularly Asia) continue to be quite fragmented, creating additional opportunities. Year to date, Avnet shares are flat, despite a 6% increase in CY11 consensus EPS estimate during that time frame, and shares currently trade at 8.1x CY11 consensus estimates, vs. its five-year average multiple of 10.8x. We are modestly raising our estimates to reflect our increased confidence in the industry and company fundamentals; we are also introducing a 12-month price target of $41, or roughly 10x our new CY11 EPS estimate of $4.08.”

Avnet closed yesterday at $33.35.