Synnex is the smallest of several tech distribution companies including Arrow Electronics Inc. (NYSE: ARW), Avnet Inc. (NYSE: AVT), and Ingram Micro Inc. (NYSE: IM).

Synnex is forecasting EPS of $0.87-$0.91, lower than analysts consensus estimate of $0.95. Revenue is forecast at $2.45-$2.55 billion, again lower than the consensus estimate of $2.6 billion. Net income is expected to drop from $38.2 million in the first quarter to $33.3-$34.5 million.

The company attributed the lower forecast to a switch-over to a fee-for-service model this year. Synnex expects a hit of $80-$100 million in its gross revenue from the change.

Shares are down -14% at $37.52 in a 52-week range of $22.56-$44.25.

Tech Data posted third-quarter EPS of $1.26 on revenue of $6.59 billion, compared with consensus estimates for EPS of $1.27 on revenue $6.74 billion. The company also noted that it was “realigning” its resources in Europe and that it expects that to cost it $15 million in the fourth quarter. The company expects “flat to low single-digit sales growth” in both its Americas and Europe segments. No word on profit expectations.

Both Synnex and Arrow have provided brighter outlooks, with Arrow raising its EPS guidance to $1.25-$1.37 for the fourth quarter, solidly above the previous consensus of $1.25. Synnex raised its fourth-quarter EPS guidance above the consensus estimate $1.06 to $1.11-$1.15.

Avnet and Arrow, like Tech Data, missed third-quarter EPS estimates by a penny or two. And with the rather bleak global economics forecasts, especially for Europe, any optimism for better earnings and revenues in wholesale sales seems misplaced. Short-term help could come as a result of recent flooding in Thailand, which will lower the supply of everything from disk drives to chips and raise the prices for these items until full production returns.

Just to offer a glimpse at potential value among the wholesalers, here’s a quick look at potential upside for these five stocks based on share prices collected at mid-morning today.

Tech Data has a median target price of $53.50, and its current share price is $46.13, for a potential gain of about 15.6%. Ingram Micro’s target price is $21.00, and its current price is $17.91, for a potential gain of 17%. Synnex has a median target price of $32.00, and a current price of $28.70, for a potential gain of about 11.5%. Arrow’s median target price is $43.00 and its current price is $34.78, for a potential gain of 23.6%. Avnet’s median target price is $37.00 and its current price is $28.14, for a potential gain of 31.5%.

Every one of these upside numbers is pretty rich, and even if the optimistic earnings forecasts from Synnex and Arrow materialize this quarter, there doesn’t seem to be any reason now to expect that optimism to carry over into 2012. The European economy is about to become a shambles, and the super committee of the US Congress is about to declare failure in reaching an agreement on budget cuts which will trigger $1.2 trillion in automatic cuts to the 2013 budget. Spending contraction is not what these companies need.

Tech Data’s shares are off more than -3.7% this morning, at $46.12, in a 52-week range of $38.21-$54.25. The company’s earnings and Avnet’s announced $1 billion credit facility — coupled with an overall 300-point drop in the DJIA this morning — are dragging all these wholesalers down today, by -2.5% to nearly -4%.

Paul Ausick

Aluminum Corporation Of China Limited (NYSE: ACH) Raised to Neutral at Goldman Sachs.
Arrow Electronics Inc. (NYSE: ARW) named as Bull of the Day at Zacks.
Huntington Bancshares Inc. (NASDAQ: HBAN) Raised to Buy at BofA/ML.
Kirkland’s, Inc. (NASDAQ: KIRK) named as Bear of the Day at Zacks.
Melco Crown PBL (NASDAQ: MPEL) Reiterated Buy and target raised to $12.40 at UBS.
PetSmart, Inc. (NASDAQ: PETM) Raised to Buy at Goldman Sachs.
PulteGroup, Inc. (NYSE: PHM) Cut to Hold at S&P Equity Research (late-Wednesday call).
SINA Corporation (NASDAQ: SINA) Cut to Sell at Goldman Sachs.
Steel Dynamics Inc. (NASDAQ: STLD) listed as a daily value stock at Zacks. 

JON C. OGG

The firm raised Dell Inc. (NASDAQ: DELL) to the Conviction Buy List based on its operating leverage and a return in teh second half for PC sales.  Goldman is also reiterating the “Buy” ratings on both Arrow Electronics, Inc. (NYSE: ARW) and Hewlett-Packard (NYSE: HPQ). Arrow is based on its operations and its relative underperformance.  The call in H-P is based upon some recovery in the printer business and on some expected strength in the second half for the PC sector.  On the storage side, Seagate Technology (NASDAQ: STX) was raised to “Buy” from Neutral, while Western Digital Corp. (NYSE: WDC) was cut to Neutral from Buy.

Apple Inc. (NASDAQ: AAPL) was maintained as Buy rating and saw its price target raised to $160 from $145.  On the software side, Microsoft Corporation (NASDAQ: MSFT), Oracle Corp. (NASDAQ: ORCL), and Symantec Corporation (NASDAQ: SYMC) remain its favorite picks.

The ratings for the sector are attractive.  There is good news here, but the sector call is broad enough that the impact may be limited.  And some of the caution may further weigh on the otherwise would-be winners today.

Jon C. Ogg
July 10, 2009

Arrow Electronics (ARW) Drop off in first quarter profit. Sells down to $26.58 from 52-week high of $44.95.

McClatchy Newspapers (MNI) Newspapers keep losing ground. Drops to $7.93 from 52-week high of $34.32.

Continental Airlines (CAL) Big losses from more airlines. Dips to $15.82 from 52-week high of $40.91.

Northwest (NWA) Another airline casualty. Sells down to $7.06 from 52-week high of $26.50.

South Financial Group  (TSFG) First quarter loss. Drops to $7.75 from 52-week high of $24.79.

Daktronics (DAKT) Cuts outlook on delayed bookings. Sells down to $13.88 from 52-week high of $32.37.