Shares of Synnex Corporation (NYSE: SNX) surged on Wednesday after the technology supply chain company reported better than expected financial results for its most recent quarter, signalling strong underlying demand for business process services.

 

Q2 Earnings Summary

  • Earnings: $2.86 per share (non-GAAP)
  • Revenue: $5.72 billion

 

Solid Earnings Continue

Over the last four quarters, Synnex has surpassed profit estimates four times.

Synnex earned $2.86 per share on revenue of $5.72 billion for its fiscal second quarter ended May 2019, the company reported late Tuesday. Analysts in a median estimate had called for an EPS of $2.71 on sales of $5.53 billion. Compared to year-ago levels, the Fremont, California-based company grew its top-line by 17%.

The company’s technology solutions revenues climbed 3.3% year-over-year to $4.6 billion. Synnex’s Hyve data centre solutions also reported progress on both the top and bottom lines.

The Concentrix analytics division continues to be one of the standout performers, with non-GAAP operating income surging 189% year-over-year.

Positive earnings surprises have become a mainstay for Synnex. Over the last four quarters, it has surpassed profit estimates four times. Revenues have also surprised to the upside in three of the last four reporting periods.

Management issued positive guidance for the company’s fiscal third-quarter. The company expects to generate revenues between $5.55 billion and $5.85 billion for the current quarter. Per-share earnings are projected to rise to $2.80-$2.92.

 

SNX Surges

Despite underperforming the S&P 500 Index for most of 2019, shares of Synnex shot through the roof on Wednesday. The stock not only traded in triple digits for the first time since early May, it rose by as much as 12.6% in New York trading.

SNX is still trading below its yearly peak near $109.00.

Synnex Share Price YTD - Jun 26 2019

Source: Yahoo Finance

The stock rally is even more impressive considering the relatively subdued performance of the S&P 500 through the first half of Wednesday’s session. The large-cap index gained 0.2% after falling sharply during the previous session.

Equity markets and technology stocks, in particular, are feeling the pressure of a subdued growth outlook, geopolitical tensions and ongoing trade-war hostilities between the United States and China. While stocks have managed to recover over the past three weeks, the gains have been almost entirely attributed to monetary policy and the belief that the Federal Reserve will slash interest rates in the immediate future.

Against this backdrop, SNX is holding up fairly well.

 

Conclusion

Synnex appears well positioned to extend its recent strong performance in the face of slowing economic growth at home and abroad. The company’s acquisition of Convergys Corp, a call-centre operator, is already paying dividends, proving once again that demand business process services aren’t slowing anytime soon.

Disclaimer: Author holds no investment position in Synnex Corporation at the time of writing.

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