UBS on Electronics Distributors: Trimming Estimates on Softer Data Points

UBS on Electronics Distributors: Trimming Estimates on Softer Data Points

UBS analyst says, "We are are lowering estimates across our coverage on the back of partially more cautious commentary from companies reporting in August (NetApp (Nasdaq: NTAP), Cisco (Nasdaq: CSCO), H-P (NYSE: HPQ) etc) and the recent UBS downward revision for 2012E global GDP growth to 3.3% from 3.8%. For the distributor companies in our coverage – Arrow Electronics (NYSE: ARW) and Avnet (NYSE: AVT), we also assume highly leveraged model and slower revenue growth pose OM downside risk."

"We trim our ARW and AVT CY11 EPS by 5-6% and CY12 EPS by 2-3%, assuming subseasonal trends in 2H11. Our revised Revs/EPS forecasts for CY 2011/2012 move to: $21.6b/$4.94 and $21.0b/$5.03, resp. from $21.8b/$5.24 and $21.8b/$5.17 for ARW; $25.9b/$4.13 and $26.1/$4.01, resp. from $27.1b/$4.37 and $26.9b/$4.07 for AVT."

UBS maintains a 'Buy' on ARW and AVT, but lowers price targets to $44 and $35 (from $48 and $38), respectively.

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