TECD's recent stock move to post-2000 highs has been corroborated by their posting of record sales and earnings for Q4 ending 1/31. Consensus EPS of 1.66 were blown away by the 1.75 results. Sales were slightly below consensus. To me, the key metric was that Europe held up despite obviously adverse conditions.
Before I go on, I need to point out that one of the reasons I really like TECD (besides how cheap it is and how fundamentally sound it remains) is that they have squeaky-clean accounting. This quarter, though, they had to share non-GAAP adjustments, which is rare. Usually, they just report GAAP, including options expenses (non-cash) as well as restructuring charges. This quarter, though, they closed down Colombia and Brazil and took a large charge. Any numbers I discuss will exclude the impact of this action, as I view the use of non-GAAP as appropriate.
Sales in the Americas (39%) fell 1%, while sales to Europe (61%) grew 2% in local currencies. Operating margins grew in the Americas but was under a little pressure in Europe due to severance charges. Overall, sales were flat on a reported basis, with the OM at 1.58%. For Fiscal 2013, the company is expecting flat sales in local currencies (which could be a slight decline overall I would guess based on current Euro/Dollar), but the OM should expand to 1.5% from 1.34%. They don't guide to an overall EPS number, but it migh be a little below the 5.74 consensus.
TECD is dirt-cheap. The company trades at 1.33X TBV and consistently generates ROIC near 14%. There is almost $10 per share cash net of debt. If we assume that the company earns only 5.50, it trades at about 10X forward earnings or close to 8X if the value of the cash is netted out.
Well, as cheap as I think it is, the stock is somewhat overbought (but not more than overall market). My longer-term view remains positive, but we could run into some selling today, especially near 60 should we get there. The call is at 9EST - more later.
