Today’s news: SYNNEX (SNX) reports fourth quarter earnings beat; moves from Strong Buy to Buy.
SYNNEX Corp. (SNX – yield 1.5%), an IT and cloud services company which just joined the Buy Low Opportunities Portfolio on January 8, reported fourth quarter results after yesterday’s market close (November year-end). Revenue and earnings per share (EPS) came in higher than analysts had expected, and higher than the company had recently projected in December. What’s more, the company raised revenue and EPS guidance for their first quarter. I’m outlining the numbers here so that those of you who love numbers can extract a stock market lesson and employ it in the future as you manage your portfolios.
Lesson #1 – On December 10, SYNNEX raised guidance for fourth quarter revenue and profits. It’s bullish when companies announce that revenue and/or profits are going to be higher than the market is expecting. That means the company is doing well, and that management is studious and cautious when forecasting their financial results. If it’s a stock that already fits your investment criteria, consider buying shares.
Lesson #2 – When the company says, “we expect $3.20-3.30 EPS in the fourth quarter,” but the consensus earnings estimate remains below those numbers, that means the quarterly earnings report will probably surprise the market with an earnings beat. That’s exactly what happened with SYNNEX’s results yesterday afternoon.
Lesson #3 – When stock markets are going through several months of bearishness, analysts tend to underestimate their earnings projections. And when the market is going through a bullish cycle, analysts tend to overestimate their earnings projections. Therefore, when we’re going through a bearish cycle (as we just did October through December), and the consensus earnings estimate is lower than the earnings guidance that comes directly from the CEO’s mouth, you’ve got to run with the CEO’s number, and realize that quarterly results are likely to surprise and please the market.
Lesson #4 – I didn’t even mention, yet, that SYNNEX announced an increase in their quarterly dividend payout yesterday, from $0.35 to $0.375. That was a no-brainer. Lots of companies announce annual dividend increases like clockwork.
Do you know how to look up dividend history, corporate press releases, consensus earnings estimates, etc.? This information is readily available to investors. If you’re curious, shoot me a brief email and I’ll be happy to point you in the right direction. But remember, your full-service and discount brokerage firms also have people at-the-ready to help you. There’s no need to cluelessly ponder how to look up earnings estimates. Let’s figure it out and expand your investment knowledge!
SNX shares are up over 12% thus far this morning, at $97.63, blowing past what appeared to be upside resistance at about 93. I expect some sideways trading going forward, and SNX could easily dip back down to 88. The stock remains undervalued. Trade out of SNX if you want to – I think you’ve locked in your maximum upside move for the time being -- but I’m going to keep SNX in the Buy Low Opportunities Portfolio for additional gains in the coming months. I’m moving SNX from Strong Buy to Buy, simply because there’s less upside in the very short-term than there was when I recommended the stock on Tuesday. Buy.
