Wrapping up Q1 earnings, we look at the numbers and key takeaways for the it distribution & solutions stocks, including ScanSource (NASDAQ: SCSC) and its peers.
IT Distribution & Solutions will be buoyed by the increasing complexity of IT ecosystems, rising cloud adoption, and demand for cybersecurity solutions. Enterprises are less likely than ever to embark on these complicated journeys solo, and companies in the sector boast expertise and scale in these areas. However, cloud migration also means less need for hardware, which could dent demand for large portions of the product portfolio and hurt margins. Additionally, planning for potentially supply chain disruptions is ongoing, as the COVID-19 pandemic showed how damaging a pause in global trade could be in areas like semiconductor procurement.
The 7 it distribution & solutions stocks we track reported a mixed Q1. As a group, revenues along with next quarter’s revenue guidance were in line with analysts’ consensus estimates.
In light of this news, share prices of the companies have held steady as they are up 3.9% on average since the latest earnings results.
ScanSource (NASDAQ: SCSC)
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
ScanSource reported revenues of $704.8 million, down 6.3% year on year. This print fell short of analysts’ expectations by 9.4%. Overall, it was a slower quarter for the company with full-year revenue guidance missing analysts’ expectations significantly.
“Our business performed well this quarter with both segments achieving year-over-year gross profit growth and higher EBITDA margins,” said Mike Baur, Chair and CEO of ScanSource,
ScanSource delivered the weakest performance against analyst estimates of the whole group. Interestingly, the stock is up 11.6% since reporting and currently trades at $40.22.
Read our full report on ScanSource here, it’s free.
Best Q1: Connection (NASDAQ: CNXN)
Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ: CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.
Connection reported revenues of $701 million, up 10.9% year on year, outperforming analysts’ expectations by 8.5%. The business had an incredible quarter with a solid beat of analysts’ EPS estimates.
Connection achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 10.1% since reporting. It currently trades at $68.29.
Is now the time to buy Connection? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: TD SYNNEX (NYSE: SNX)
Serving as the crucial middleman in the technology supply chain, TD SYNNEX (NYSE: SNX) is a global technology distributor that connects thousands of IT manufacturers with resellers, helping businesses access hardware, software, and technology solutions.
TD SYNNEX reported revenues of $14.53 billion, up 4% year on year, falling short of analysts’ expectations by 1.7%. It was a softer quarter as it posted a miss of analysts’ EPS estimates.
As expected, the stock is down 1% since the results and currently trades at $124.15.
Read our full analysis of TD SYNNEX’s results here.
CDW (NASDAQ: CDW)
Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW (NASDAQ: CDW) is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.
CDW reported revenues of $5.20 billion, up 6.7% year on year. This print surpassed analysts’ expectations by 5.3%. Overall, it was an exceptional quarter as it also recorded a solid beat of analysts’ EPS estimates.
The stock is up 14.7% since reporting and currently trades at $188.10.
Read our full, actionable report on CDW here, it’s free.
Avnet (NASDAQ: AVT)
With a century-long history of adapting to technological evolution, Avnet (NASDAQ: AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
Avnet reported revenues of $5.32 billion, down 6% year on year. This result met analysts’ expectations. Aside from that, it was a mixed quarter as it also produced a solid beat of analysts’ EPS estimates but a significant miss of analysts’ EPS guidance for next quarter estimates.
The stock is flat since reporting and currently trades at $50.91.
Read our full, actionable report on Avnet here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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