Earnings Cheat Sheet: Is Systemax the New Best Buy?

Once again, Systemax (SYX) proved to be Best Buy’s (BBY) dark horse competitor with a smash hit earnings report. During the Great Recession, Systemax (SYX) purchased Circuit City’s customers for $1 each, or 14 million customers for $14 million, during bankruptcy proceedings. It does not take a rocket scientist to determine Systemax can eventually yield a high ROI per customer acquired. The story in today’s report is the massive pick-up in business-to-business sales, a sign that companies are increasing their capital expenditures on consumer electronic technology upgrades. Business-to-business channel sales grew 35% to $417.4 million in the 2nd quarter.

Earnings: Q2 diluted profits of $.25 vs. $.17 in Q2 last year, huge rise of 47% in profits Year-over Year.

Revenue: Increased 12% Year-over-Year at $805.9 Million vs. $721.6 Million in the same quarter a year ago, a strong display of double-digit sales growth Year-over-Year.

Richard Leeds, Chairman & CEO of Systemax (SYX) stated, “Systemax’s solid second quarter performance, with consolidated sales growth of 12% and all-time record revenues, was once again led by our business to business channels, which produced strong results as small- and mid-sized businesses have started to return to more normalized spending. Our consolidated results demonstrate the benefits of our business diversification, one of the leading components of our long-term growth strategy, and continue to buffer the challenging consumer spending environment. Looking ahead, we remain focused on prudently building our businesses and leveraging our robust brand portfolio.”

Comment: Shares of Systemax (SYX) are flat following the company’s earnings release after-the-bell, trading at $16.30 per share:

In the chart above, Systemax (SYX) shares are trading right below the 50-day moving average and further away from the 200-day moving average. Lately, Systemax’s share price has build a base of support above $15 per share. After today’s solid earnings report in a continued challenging economic climate, shares should continue to hold firm in the current price zone. At first glance of the earnings report, it appears SYX has paid down a portion of the very small debt on their balance sheet. With a strong management team in the Leeds Brothers, SYX continues to meet our Cheat Sheet framework for investing. Continue to stay tuned to the SYX growth story.

Disclosure: Systemax (SYX) was a past Wall St. Cheat Sheet Premium Feature Trade. Author is Long SYX