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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Francois Goelo who wrote (24084)	2/2/1999 7:06:00 PM
From: kendall harmon	Respond to of 120523

TECD was definitely overdone today and is an excellent bounce candidate for tomorrow. The following J.C. Bradford comments are for people to ponder. Here is the release: BRAD: TECD: PRERELEASES 4Q SHORTFALL 11:25am EST 2-Feb-99 J.C. Bradford & Co. Research Note February 2, 1999 TECH DATA CORPORATION (TECD-$22 1/8B-OTC) Prereleases 4Q Shortfall Rating: Strong Buy FY January EPS: 1998 1999E Old 2000E Old Shares O/S 1Q $0.41 $0.46A 58.0 mil. 2Q $0.47 $0.55A 3Q $0.51 $0.63A 4Q $0.53 $0.61 $0.69 Full Year $1.92 $2.27 $2.35 $2.30 $2.80 * Prereleased $0.08 shortfall in 4Q EPS * Price war a short-term issue; fundamentals remain strong * Sales in line; demand remains strong * Estimates reduced; reiterate Strong Buy rating On Tuesday, February 2, Tech Data released its preliminary results for 4Q99. Sales are estimated at $3.8 billion, in line with our expectations, which represents growth of over 80% from year-ago levels. However, EPS is expected to be $0.61-$0.64, as compared with our estimate of $0.69. The shortfall is due primarily to aggressive pricing particularly in the U.S. market by some of its large competitors, we think Merisel and Pinacor. We believe this aggressive price war is being driven by these two companies in an attempt to regain some lost market share over the past three years. At the same time it is our belief that these two competitors are experiencing very limited profitability and as a result, the price war is temporary, maybe six months. End-market demand and sales growth continue to be robust as TECD experienced 12% sales growth in the U.S., 24% in Europe (excluding C2000), and 9% in the rest of world. TECD also indicated it intends to tighten credit toward its Latin American customer (sales are 3% of total sales) which has a few pennies' impact to EPS when a reserve on receivables is included. Management also noted that its C2000 operations met plan on sales and profitability, which indicates to us that Europe remains the healthiest region. In addition, management noted that inventory ended the quarter in line, which is positive compared with the year-ago bloated conditions in the channel with regard to inventory. We are reducing our 4Q99 EPS estimate by $0.08 to $0.61, and our FY00 estimate by $0.50 to $2.30, to reflect hits to TECD's gross margin. Our sales estimates remain unchanged at $3.75 billion and $15.9 billion for 4Q99 and FY00, respectively. TECD expects to release its full 4Q results on or about March 30. Obviously this news has had some downward pressure on the stock over the past few weeks, however, we believe TECD shares, while weak today, still represent a value to long-term investors. At current levels TECD shares sell at 1.4x book value and 10x our revised FY00 estimates. We view this "price war" as a temporary issue and, while the sentiment on TECD shares may be somewhat negative during the event, once improving signs emerge, TECD shares could resume their P/E expansion. As such, we reiterate our Strong Buy rating. Tech Data Corporation will present at the 1999 J.C Bradford & Co. Institutional Equity Conference. Sounds pretty good for long term. Short term we should expect a pop up with a good market.