This electronics company just beat its estimates by a penny, and is growing its Latin American business.
Arrow Electronics (ARW)
From Ford Equity Research Report
Arrow Electronics (ARW) is a provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company offers a spectrum of products on behalf of electronic components and enterprise computing solutions suppliers, including materials planning, new product design services, programming and assembly services, inventory management, reverse logistics, electronics asset disposition, training and education, and a managed services including cloud computing, security, and networking services.
Arrow has enjoyed a very positive trend in earnings per share over the past 5 quarters, and while recent estimates for the company have been raised by analysts, ARW has posted better than expected results. Based on operating earnings yield, the company is undervalued when compared to all of the companies we cover.
Ford’s earnings momentum measures the acceleration or deceleration in trailing 12 month operating earnings per share growth. While Arrow Electronics Inc.'s earnings have increased from $4.26 to an estimated $5.07 over the past 5 quarters, they have shown strong acceleration in quarterly growth rates when adjusted for the volatility of earnings. Nearly 40 years of research have shown that the change in the growth of earnings per share is an important factor that drives stock price performance.
Earnings forecasts for Arrow Electronics Inc. have been increasing which indicates an improvement in future earnings growth. The company has also reported higher earnings than those predicted in earlier estimates. This indicates an ability to exceed analysts’ expectations and the potential for improving earnings growth in the future.
Arrow Electronics Inc.'s operating earnings yield of 9% ranks above 93% of the other companies in the Ford universe of stocks, indicating that it is undervalued. A stock may stay undervalued or overvalued for a long period of time. For this reason, it is important to combine this factor with shorter-term predictive factors such as earnings momentum or price momentum to identify more imminent valuation adjustments.
Arrow Electronics Inc.'s stock price is up 52.4% in the last 12 months, up 10.1% in the past quarter and down 7.0% in the past month. This historical performance should lead to above average price performance in the next one to three months.
We project that Arrow will strongly outperform the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement.
Richard Segarra, CFA, Ford Equity Research Report, www.fordequity.com, 800-842-0207, May 2, 2014