TD SYNNEX Q1 Earnings Miss Estimates, Stock Declines on Weak Guidance

TD SYNNEX CORP SNX reported non-GAAP earnings of $2.80 per share for the first-quarter fiscal 2025, which missed the Zacks Consensus Estimate by 2.44%. The bottom line declined 6.4% year over year due to rising expenses.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

SNX’s revenues increased 4% year over year to $14.53 billion but missed the consensus mark by 1.78%.

On a constant-currency (cc) basis, revenues represent 6% year-over-year growth, driven by advancements in the Endpoint Solutions and Advanced Solutions portfolios.

After the results were announced, TD SYNNEX's shares dropped sharply 14.28% on March 27. This decline can be attributed to disappointing results and guidance, as well as rising expenses, which heightened investor concerns and led to a sharp drop in the stock price.

TD SYNNEX’s Q1 Details

Categorically, revenues from Endpoint Solutions reached $7.1 billion, reflecting 5% year-over-year growth. Revenues from Advanced Solutions reached $7.4 billion, mirroring 3% year-over-year growth. 

The non-GAAP gross profit decreased 0.8% year over year to $998 million, whereas the gross margin contracted 33 basis points (bps) to 6.87% due to higher margins in the prior year in strategic technologies and product mix.

Adjusted SG&A expenses increased to $599.2 million from the year-ago quarter’s $581.2 million. As a percentage of revenues, SG&A expenses remain flat on a year-over-year basis.

The fiscal first-quarter non-GAAP operating income was down 6.1% to $398.8 million. The non-GAAP operating margin contracted 30 bps on a year-over-year basis to 2.7%.

Non-GAAP gross billings were $20.7 billion in the fiscal first quarter, up 7.5% on a year-over-year basis. On a cc basis, non-GAAP gross billings increased 9.5% from the prior-year quarter.

TD SYNNEX’s Balance Sheet & Cash Flow Details

As of Feb. 28, 2025, TD SYNNEX’s cash and cash equivalents were $541.9 million compared with $1.06 billion as of Nov. 30, 2024.

The long-term debt was $3.74 billion for the reported quarter, unchanged from the prior quarter.

The company used $748 million of cash for operational activities in the fiscal first quarter compared with a $562-million cash inflow in the previous quarter. SNX reported a negative free cash flow of $790 million in the fiscal first quarter compared with a positive free cash flow of $513 million in the previous quarter.

In the first quarter of fiscal 2025, SNX returned $138 million to stockholders with $101 million of share repurchases and $37 million of dividend payments.

For the first quarter of fiscal 2025, TD SYNNEX announced a 10% increase in its quarterly cash dividend, raising it to 44 cents per share. This move indicates the company's commitment to returning value to shareholders amid current financial challenges.

SNX Provides Conservative 2Q25 Guidance

For the second quarter of fiscal 2025, SNX expects revenues of $13.9-$14.7 billion. Non-GAAP earnings are expected to be $2.45-$2.95 per share. The Zacks Consensus Estimate for revenues is pegged at $14.76 billion and the consensus mark for earnings is pinned at $2.96 per share, unchanged over the past 30 days.

Non-GAAP net income is expected to be $205-$247 million.

SNX’s Zacks Rank & Stocks to Consider

Currently, SNX carries a Zacks Rank #4 (Sell).

Amphenol APH, International Business Machines IBM and Wipro Limited WIT are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

APH shares have gained 18.2% for the past year. The long-term expected earnings growth rate for the company is 14.87%.

IBM shares have jumped 28.9% in the past year. The long-term expected earnings growth rate for the company is 4.23%.

WIT shares have rallied 8.8% in the past year. The long-term expected earnings growth rate for the company is 8.45%.

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This article originally published on Zacks Investment Research (zacks.com).

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