Systemax Inc. Earnings: Five Quarters in a Row of Expanding Margins, Net Income Climbs

Falling revenue did not prevent Systemax Inc. (NYSE:SYX) from reporting a profit boost in the first quarter. Systemax is mainly a direct marketer of brand-name and private-label products.

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Systemax Earnings Cheat Sheet for the First Quarter

Results: Net income for Systemax Inc. rose to $708.3 million (19 cents per share) vs. $13.6 million (36 cents per share) in the same quarter a year earlier. This marks a substantial increase from the year-earlier quarter.

Revenue: Fell 1.8% to $913.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Systemax Inc. fell short of the mean analyst estimate of 38 cents per share. It fell short of the average revenue estimate of $951.8 million.

Quoting Management: Richard Leeds, Chairman and Chief Executive Officer, commented, “On an overall basis, I am disappointed in our results for the quarter. The performance of our North America technology consumer business was below our internal expectations and masks the strong performance in the rest of the business. We are highly focused on re-establishing revenue growth and improving profitability in this business. The highlight of the quarter was our B2B operations. Our industrial products business grew 28%, which was its 8th consecutive quarter of organic revenue growth exceeding 25%. Our technology B2B businesses in both Europe and North America had another quarter of solid revenue growth.”

Key Stats:

Last quarter marked the fifth consecutive quarter of increasing gross margins, as the company’s gross margin expanded 0.3 percentage point from the year-earlier quarter to 14.3%. In this period, margins have grown an average of 0.5 percentage point per quarter on a year-over-year basis.

The company has now seen net income rise in three straight quarters. In the fourth quarter of the last fiscal year, net income rose 15.1% and in the third quarter of the last fiscal year, the figure rose 23.3%.

The company has missed analyst estiamtes for four quarters in a row. It fell short by 5 cents in the fourth quarter of the last fiscal year, by 5 cents in the third quarter of the last fiscal year, and by 2 cents in the second quarter of the last fiscal year.

Revenue has fallen in the past two quarters. In the fourth quarter of the last fiscal year, revenue declined 2.7% to $978.8 million from the year-earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from 33 cents a share to 30 cents over the last ninety days. For the fiscal year, the average estimate has moved down from $1.65 a share to $1.62 over the last sixty days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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