Connection Earnings Preview: Can the IT Solutions Provider Break Its Streak of Revenue Misses?
IT solutions distributor Connection (NASDAQ: CNXN) is set to announce its quarterly earnings after market close on Wednesday, with Wall Street looking for signs of a turnaround after recent stumbles.
The company's previous quarter fell short of expectations, posting revenue of $709.1 million—a 4.7% miss against analyst forecasts and a 2.2% decline year-over-year. The results marked a dual disappointment, with earnings per share also missing estimates significantly.
For the upcoming report, analysts project a more optimistic 3.8% year-over-year revenue increase to $735.5 million, which would represent an improvement from the 1.8% growth recorded in the same period last year. Adjusted earnings are anticipated at $0.86 per share.
Notably, analyst estimates have remained largely unchanged over the past month, suggesting a consensus that the business is tracking steadily. However, historical data reveals a concerning pattern: Connection has failed to meet revenue expectations in five of the last eight quarters.
The broader tech hardware and electronics distribution sector offers a mixed picture. Peer company Avnet recently reported strong Q4 results, with revenue growing 11.6% year-over-year and surpassing estimates by 4.5%, triggering a 19.1% stock surge. TD SYNNEX also outperformed, with revenue up 9.7% and a 2.6% beat. This contrast places additional scrutiny on Connection's ability to execute in a competitive environment.
Ahead of the earnings release, sector sentiment has been cautiously positive, with average stock prices rising 1.6% over the past month. Connection's shares have outperformed that average, climbing 4.1%, yet they continue to trade at a discount to the average analyst price target of $76, compared to a recent price near $60.
Market Voices:
"I'm cautiously optimistic," says Michael Torres, a portfolio manager at Ridgeview Capital. "The stable estimates and recent peer performance suggest the sector demand is there. If Connection hits its numbers, that discount to price target could start to close."
"This is a prove-it moment, plain and simple," argues Sarah Chen, an independent tech analyst. "Five revenue misses in two years isn't a streak; it's a trend. Another miss would signal deeper operational issues, not just market softness. Management's credibility is on the line."
"As a long-term shareholder, I'm looking beyond a single quarter," comments David Reynolds, a retired IT executive. "The focus should be on their strategy in cloud and security solutions. That's where the growth is, not just in moving boxes."
"Enough with the patience!" exclaims retail investor Mark Gibson on a popular forum. "The peers are executing. Avnet's stock is soaring. We keep getting 'disappointing' quarters. If they miss again, it's time for a major shake-up in the C-suite."