TD SYNNEX Gearing Up For Return To Y/Y Growth With Advanced Solutions And Digital Transformation, Says Analyst

Stifel analyst Matthew Sheerin reiterated a Buy rating on TD SYNNEX Corporation SNX, raising the price target to $120 from $110.

The company is scheduled to release its Q3 results on September 26, 2023, before the U.S. market opens.

While the analyst expects the quarter to be relatively muted, an in-line print and signs of more stable demand should relieve investors, notes Sheerin. 

While the analyst believes SNX is still a couple of quarters away from returning to Y/Y growth, the numbers have been well scrubbed at this point (CY23/CY24 Consensus EPS estimates are down 13%/14% YTD, respectively), with multiple catalysts driving a return to growth in FY24 and earnings leverage driving d-d EPS growth.

For the quarter to be reported, the analyst expects sales and adjusted EPS estimates of $14.037 billion and $2.49, both roughly in line with Street. 

The sales estimate reflects an 8.6% y/y decline (-0.2% q/q), driven by 11.3% and 5.2% y/ y declines in Americas (62% of sales) and EMEA (32% of sales), respectively. The sales result will be partially offset by 4.9% y/y growth in APJ (6% of sales).

Sheerin expects few surprises to SNX’s Aug-Q print, given recent July-Q reports and a slew of commentary from various conferences in the past two weeks, where signs still point to choppy IT demand with spending varying by product.

However, advanced solutions will offset that weakness, driven by customers continuing to prioritize spending on mission-critical and digital transformation initiatives and a still-elevated but declining backlog.

Below the top line, the analyst sees a Gross Margin of 6.7% (-17bp q/q; +71bp y/ y) and an Operating Margin of 2.7% (flat q/q; +9bp y/y).

The analyst expects FY23 sales and adj. EPS estimates of $58.279 billion/$10.79, which is ~$225 million below Street’s sales estimate but in line with EPS.

Price Action: SNX shares are trading higher by 0.78% to $101.56 on the last check Tuesday.