Ingram Beats EPS, Guides Cautiously

Ingram Micro Inc. (IM) has reported fourth-quarter 2011 earnings per share of 70 cents, surpassing the Zacks Consensus Estimate of 55 cents. However, the results were slightly down from 72 cents reported in the earlier-year quarter.

Revenues

Ingram Micro’s fourth quarter revenue of $9.95 billion increased 0.7% from $9.88 billion in the year-ago quarter. Weaker-than-expected revenues in Asia Pacific and Europe were offset by the strength in North America and Latin America.

Revenue contribution from North America increased 4.0% year over year to $4.21 billion, mainly on higher hard disk drive pricing. Europe, Middle East and Africa (EMEA) contributed $3.20 billion, down 4.6% from the year-ago quarter. The decline was primarily due to the difficult macro environment and competitive pressures.

The Asia-Pacific region generated $1.96 billion in sales, down 0.8% from $1.98 billion in the fourth quarter of 2010. The weakness was mainly due to lower sales in Australia resulting from the ERP (Enterprise Resource Planning) system transition issue there. Latin America sales grew 15.3% year over year to $572.5 million, benefiting from a negative translation impact of 7% from relatively stronger regional currencies.

Operating Results

Gross profit dropped 1.0% to $554.3 million in the reported quarter from $559.9 million in the year-ago quarter. Despite the company’s sound revenue, gross margin dropped 10 basis points (bps) year over year to 5.6% mostly due to higher procurement costs.

Other things that affected the gross margin were operational interruptions at the new enterprise system in Australia, competitive pricing in some Asian markets, subdued retail demand in Europe and the Asia-Pacific, and a higher mix of emerging markets revenue that typically carry lower margins. But the higher pricing of hard disk drives due to supply disruption caused by Thailand flood, posed some cushion.

Selling, general and administrative expenses were $373.9 million, down 4.4% from $391.1 million in the year-ago quarter. The cost reduction led to an operating profit growth of 5.3% from the year-ago quarter. Operating margin increased 10 bps year over year to 1.8%.

Ingram Micro reported net income of $104.9 million, or 68 cents per share, compared to $115.0 million, or 71 cents in the year-ago quarter.