Technology Distribution, EMS, PCB, Connectors and Passives
Chain Letter
Thoughts and news from the Technology Supply Chain
August 8, 2016
Industry Overview
Technology Supply Chain Weekly
Matthew Sheerin
msheerin@stifel.com
(212) 271-3753
Nikhil Kumar, CFA
kumarn@stifel.com
(212) 271-3635
Alvin Park, CFA
parka@stifel.com
(212) 271-3809
The Week Ahead (Aug 8 – Aug 12)
Monday:
Semiconductor manufacturers Texas
Instruments (TXN) and Intel (INTC)
are schedule to present at a competitor’s
conference. The commentary from
management will provide color on end
demand.
Tuesday:
Fuse manufacturer Littelfuse (LFUS)
and EMS company Flex (FLEX) are
scheduled to present at a competitor’s
conference. We will look for color on
end demand.
Wednesday:
EMS company Flex (FLEX) and IT
solutions provider ePlus (PLUS) are
scheduled to present at conferences at
two of our competitors. We will look for
color on end demand.
Avnet (AVT) is scheduled to report
earnings before the market open. Call is
scheduled for 11:00 a.m. ET.
Thursday:
IT solutions provider Datalink (DTLK)
and EMS company Celestica (CLS) are
scheduled to present at a competitor’s
conference. We will look for color on
end demand.
Prices as of 8/5/2016 market close
SPOTLIGHT: Final Take on Q2 Earnings
Earnings season wraps-up for our covered universe this week with Avnet on
Wednesday, but we don’t see any major surprises given the company already
pre-announced negatively due to ERP issues. Overall, we would rate results
across the supply chain as better than expected, though outlooks remain mixed.
Of the 16 companies in our space reporting this quarter, we saw six clean "beat
and raises", two were inline to slightly better, and eight misses. Amid a generally
stable overall demand environment, we saw divergent performance across the
companies, perhaps a reflection of end market focus, and company- specific
strategies. Most end markets remain flattish; on the negative front, telecom
infrastructure remains week, with no signs of a near-term recovery. And
automotive remains a bright spot, driven by continued electronic content
growth. Although data points around PC this quarter were a welcome addition
after several quarters of downdraft, overall IT spending remains muted,
particularly for legacy products. In addition, concern around impact from Brexit
remains (though only a few companies were blaming this for weak results).
Industrial markets overall remain muted, particularly in N. America, while
defense/aerospace remains healthy long-term.
Stock to highlight post-earnings: In the technology distribution space, Arrow
Electronics continues to benefit from a series of internal investments and
M&A in both business segments (computing and components). We believe
shares remain attractive, at less than 9x forward earnings. Among the
resellers/solution providers, we believe CDW should see above-market growth
by taking advantage of its diversified portfolio as well as on market share gains.
Among EMS stocks, Flex continues to shift its portfolio toward diversified
markets (such as industrials, healthcare, energy), which should expand margins
overtime with a more stable topline; in addition fee cash flow should remain
healthy at the firm. We expect Flex’s multiple to expand on consistent
execution. While Plexus remains well positioned in its key verticals—
healthcare, defense and industrial – valuation at 14x forward earnings keep us on
sidelines. PCB maker TTM Technologies is in the midst of Apple-driven
program ramps that combined with benefits from the recent cost actions could
drive upside to estimates in the later part of this year. We also remain positive
sensor maker Sensata, which trades at ~13x forward earnings, yet is poised to
see margin improvements over the next few quarters on cost cutting and volume
growth.
Stifel does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
All relevant disclosures and certifications appear on pages 11 through 12 of this report.
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
Technology Supply Chain June Quarter Earnings Calendar
Jun Q Actual
Rev (mn)
EPS
Prior SN Estimates
Rev (mn)
EPS
Sep Q Guidance
Rev (mn)
EPS
Prior SN Estimates
Rev (mn)
EPS
Beat/Miss/
Inline
Reported Companies
Week of July 18
TE Connectivity Ltd. (TEL)
20-Jul
$3,121
$1.08
$3,099
$1.03
$3,339
$1.20
$3,309
$1.22
Miss
Amphenol Corporation (APH)
20-Jul
$1,548
$0.65
$1,514
$0.63
$1,567
$0.68
$1,606
$0.69
Miss
Celestica Inc. (CLS)
21-Jul
$1,486
$0.29
$1,460
$0.28
$1,521
$0.30
$1,473
$0.29
Beat
Flex (FLEX)
21-Jul
$5,877
$0.27
$5,709
$0.27
$6,018
$0.28
$6,229
$0.29
Miss
Plexus Corp. (PLXS)
21-Jul
$668
$0.82
$656
$0.77
$672
$0.81
$678
$0.82
Miss
Week of July 25
Sensata Technologies Holding NV (ST)
26-Jul
$828
$0.73
$819
$0.71
$793
$0.73
$815
$0.75
Miss
AVX Corporation (AVX)
27-Jul
$315
$0.19
$311
$0.19
$316
$0.16
$319
$0.20
Miss
TTM Technologies, Inc. (TTMI)
27-Jul
$602
$0.28
$599
$0.19
$640
$0.32
$633
$0.26
Beat
KEMET Corporation (KEM)
28-Jul
$185
$0.06
$183
$0.04
$188
$0.06
$187
$0.07
Miss
Ingram Micro Inc. (IM)
28-Jul
$10,123
$0.61
$9,520
$0.44
$10,426
$0.62
$9,889
$0.54
Beat
Week of August 2
Vishay Intertechnology, Inc. (VSH)
2-Aug
$590
$0.23
$585
$0.22
$590
$0.24
$595
$0.25
Miss
Arrow Electronics, Inc. (ARW)
2-Aug
$5,972
$1.65
$6,009
$1.65
$5,855
$1.51
$5,802
$1.48
Beat
ePlus (PLUS)
2-Aug
$299
$1.54
$303
$1.38
$336
$2.02
$340
$1.99
Beat
CDW Corp. (CDW)
3-Aug
$3,665
$0.93
$3,590
$0.86
$3,750
$0.92
$3,726
$0.91
Beat
Insight Enterprises (NSIT)
3-Aug
$1,456
$0.97
$1,400
$0.75
$1,381
$0.50
$1,348
$0.57
In-Line
Littelfuse, Inc. (LFUS)
4-Aug
$272
$1.44
$271
$1.42
$268
$1.43
$272
$1.47
Miss
Companies Scheduled to Report Earnings
Jun Quarter Estimates
Release
Date
SN Estimates
Rev (mn)
EPS
Sep Quarter Estimates
Consensus Estimates
SN Estimates
Rev (mn)
EPS
Rev (mn)
EPS
Consensus Estimates
Rev (mn)
EPS
Technology Distribution
Avnet, Inc. (AVT)
10-Aug
$6,200
$0.83
$6,212
Note: Estimates are as of the market close on 8/5/16.
Source: Factset and Stifel estimates
Page 2
$0.88
$6,157
$0.84
$6,178
$0.86
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
Earnings recap of companies in our universe: VSH, ARW, PLUS, CDW, NSIT, and LFUS
Vishay Q2 revenue and adjusted EPS of $590.1mn and $0.23 were modestly above our estimate on generally seasonal demand
trends, highlighted by continued strength in automotive, while operating margin of 9.1% was the best showing in nearly two
years on good leverage as well as ongoing restructuring efforts. Revenue guidance was flat q/q, which is seasonal, while GM is
expected to modestly improve on the completion of restructuring in the MOSFET (power semiconductor) segment, which will
save $23mn annually. Shares were trading down mid-day, we believe on the flattish sales guide, but we note that management
appears to have more confidence in the company's bookings trends. We tweak estimates but maintain our FY17 EPS of $1.03.
Our estimate reflects just 3% top-line growth next year, while we expect double-digit EPS growth on continued margin leverage.
Lastly, we note that the company has begun to repatriate cash back to the U.S. and also began buying back stock, which should
be a positive catalyst over the next couple of years. We maintain our Buy rating.
VSH Product Line Revenue
FY14
($ in millions)
FY15
FY16
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
Resistors/Industors
294
188
304
192
297
190
287
186
281
187
272
179
257
173
248
166
270
182
277
192
Capacitors
106
112
107
101
94
93
84
82
88
85
308
337
341
324
312
318
303
307
299
312
Siliconix
113
124
122
112
107
106
109
104
101
102
Weakness in computers offset by strenght in auto
Diodes
137
150
151
141
137
139
124
135
135
142
Recovering from a soft 2H'2015
58
63
68
71
68
73
70
68
63
68
602
641
638
611
593
590
560
555
569
589
Passives
Actives
Optoelectronics
Total
Comments
Continued growth in Asia (China)
Negatively impacted by weak oil & gas and computers
Strength in sensors
Q/Q Performance
Passives
-2%
3%
-2%
-3%
-2%
-3%
-6%
-4%
9%
3%
Resistors/Industors
-1%
2%
-1%
-2%
1%
-4%
-3%
-4%
10%
5%
Capacitors
-4%
6%
-4%
-6%
-7%
-1%
-10%
-2%
7%
-3%
-3%
9%
1%
-5%
-4%
2%
-5%
1%
-3%
4%
Siliconix
-4%
10%
-2%
-8%
-4%
-1%
3%
-5%
-3%
1%
Diodes
-3%
9%
1%
-7%
-3%
1%
-11%
9%
0%
5%
Optoelectronics
2%
9%
8%
4%
-4%
7%
-4%
-3%
-7%
8%
-2%
6%
0%
-4%
-3%
-1%
-5%
-1%
3%
4%
Actives
Total
Source: Company data

How the stock reacted: Shares traded down 1.9% vs. down 0.6% for the S&P
Page 3
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
Arrow reported Sales and adjusted-EPS were $5.97bn (up 9% q/q, up 2% y/y, flat y/y ex-M&A/FX) and $1.65, vs. our
estimates of $6.00bn and $1.65 (Street was at $6.04bn and $1.64).We maintain our positive stance on ARW shares and reiterate
our $72 PT following a solid Q2, including record sales and earnings within its computing segment, and an overall seasonal guide
for Q3. The outlook, which was slightly ahead of our estimate but just in line with Consensus, clearly disappointed investors,
with the stock down ~5% today (vs. down ~1% for the S&P 500). To be fair, expectations heading into the print were high
given the recent run in Arrow shares as well as the relatively upbeat results from several key suppliers and other distributors. But
we saw few reasons to be concerned with the quarter, the quality of earnings, or Arrow's strategic vision. Indeed, Arrow has
made a series of internal investments and M&A in both businesses that should position it well going forward. We raised our
forward estimates, moving FY17 EPS to $7.12 from $7.02, as we expect modest margin improvements in a slow-growth
environment, as well as good cash flow. Our estimates do not factor in additional share repurchases, and we note that Arrow has
$286mn left in its existing program, which would add roughly $0.35-$0.40 in annual EPS if completed.
Arrow Electronic Components
$ in millions
1Q15
2Q15
Total Sales
$3,347
$3,699
% Sales
growth, y/y
growth, q/q
67%
(2%)
(7%)
63%
4%
11%
Operating Income
Op Margin
North America
1Q16
$3,676
54%
2%
(1%)
67%
10%
0%
171
177
172
157
179
4.8%
4.7%
4.3%
4.9%
$1,458
$1,481
$1,440
40%
(4%)
2%
39%
3%
(3%)
$972
$1,058
26%
8%
(2%)
29%
15%
9%
$1,215
$1,178
33%
5%
(2%)
32%
15%
(3%)
$1,398
$1,474
42%
(0%)
(9%)
40%
0%
5%
Europe
$923
$987
% Sales
growth, y/y
growth, q/q
28%
(7%)
3%
27%
0%
7%
$1,026
$1,238
31%
(0%)
(11%)
33%
11%
21%
% Sales
growth, y/y
growth, q/q
65%
(1%)
(0%)
4Q15
$3,669
5.1%
% Sales
growth, y/y
growth, q/q
Asia
3Q15
$3,692
39%
(4%)
(1%)
$993
27%
5%
1%
$1,241
34%
(2%)
0%
2Q16
Comments
$3,833 Previous 2Q16 Guide: $3.75bn-$3.95bn (up 4.7% q/q at the midpoint)
64% up ~1% y/y ex-M&A and FX
4% B:B 1.03 in the Jun-Q
4% B:B above parity four weeks into the Sep-Q
187 Sep-Q Guide: $3.725bn-$3.825bn (roughly flat q/q at the midpoint)
4.9%
$1,478
39% Growth in SMB customers offset by large supply-chain oriented
0% customers
3% Y/y strength from medical and lighting verticals
$1,057
28% Strong transportation and lighting
7% Y/y strength from aerosapce & defense
(0%)
$1,298
34% Strength from core SMB offset by large supply chain customers
5% Strong growth in transportation and growth in wireless y/y
10%
Source: Company reports
Arrow Computer Products
$ in millions
1Q15
2Q15
Total Sales
$1,656
$2,132
% Sales
growth, y/y
growth, q/q
33%
(0%)
(41%)
37%
1%
29%
Operating Income
Op Margin
North America
3Q15
$2,006
35%
7%
(6%)
4Q15
1Q16
$3,083
$1,798
46%
10%
54%
33%
9%
(42%)
2Q16
36% down 3% y/y ex-FX and ex-M&A
0% Sep-Q Guide: $1.925bn-$2.125bn (down ~5% q/q at the midpoint)
19%
73
105
91
179
83
115
4.4%
4.9%
4.5%
5.8%
4.6%
5.4%
$1,407
$2,028
$1,191
$1,419
66%
11%
44%
66%
11%
(41%)
66% Growth in infrastructure software
(2%) Weak legacy storage
19%
$1,055
$607
$720
34%
7%
76%
34%
4%
(42%)
34% Growth in infrastructure software and proprietary servers
6% Weak legacy storage
19%
$1,074
$1,454
% Sales
growth, y/y
growth, q/q
65%
8%
(41%)
68%
9%
35%
70%
11%
(3%)
Europe
$582
$678
$599
% Sales
growth, y/y
growth, q/q
35%
(12%)
(41%)
32%
(13%)
17%
30%
(3%)
(12%)
Source: Company reports

Comments
$2,139 Previous 2Q16 Guide: $2.075bn-$2.275bn (up ~21% q/q at midpoint)
How the stock reacted: Shares traded down 5.3% vs. down 0.6% for the S&P
Page 4
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
ePlus reported June quarter revenue of $298.5mn and was just short of our estimate, while EPS of $1.54 handily beat our
estimate on higher-than-expected GM due to mix. Year-on-year growth was a solid 11% as the IT solution provider continues to
gain share in a very fragmented market. As per its policy, the company issued no guidance for the September quarter other than
to acknowledge that comps will be quite tough, as ePlus grew a robust 25% q/q a year ago, which we do not expect to repeat. In
addition, new CEO Mark Marron, who was just promoted from COO, said the company would continue to add headcount,
particularly customer-facing sales and engineers, which also could weigh on margins near-term. Looking at our model, we are
raising forward EPS largely to account for the exclusion of amortization of acquisition-related intangibles, which adds roughly 16
cents in EPS. Shares are trading at less than 11x our new FY17 EPS of $7.31. While not expensive, we maintain our Hold rating
due to lack of better visibility on sales growth and margin leverage.
Sales Breakdown
Technology Segment
Sales
y/y growth
q/q growth
Gross Profit
Q1-June 14 Q2-Sep14 Q3-Dec14 Q4-Mar 15 FY15-Mar Q1-June 15
263.4
288.4
297.8
258.9
1,108.4
261.5
6.0%
9.6%
15.5%
2.8%
8.5%
-0.7%
4.6%
9.5%
3.3%
-13.1%
1.0%
50.5
gross margin
19.2%
Operating profit
12.5
op-margin
4.7%
Financing segment
Sales
8.9
y/y growth
-17.8%
q/q growth
10.7%
Gross Profit
5.9
gross margin
66.8%
Operating profit
2.3
op-margin
25.8%
Source: Company reports and Stifel estimates

Q2-Sep15
Q3-Dec 15 Q4-Mar 16 FY16-Mar Q1-June 16
326.0
289.4
292.2
1,169.1
291.5
13.0%
-2.8%
12.9%
5.5%
11.5%
24.7%
-11.2%
1.0%
-0.3%
57.6
59.6
53.0
220.8
53.8
64.8
57.9
60.9
237.3
61.6
20.0%
17.6
6.1%
20.0%
18.0
6.1%
20.5%
12.9
5.0%
19.9%
61.1
5.5%
20.6%
13.0
5.0%
19.9%
22.7
7.0%
20.0%
14.7
5.1%
20.8%
13.4
4.6%
20.3%
63.8
5.3%
21.1%
14.6
5.0%
9.1
13.6%
2.3%
6.3
69.2%
2.7
29.7%
8.4
-8.9%
-7.5%
5.8
69.1%
2.5
30.2%
8.4
4.5%
-0.2%
5.7
67.9%
2.2
26.1%
34.8
-3.6%
8.4
-6.1%
-0.5%
5.3
63.9%
2.0
24.4%
10.3
13.2%
23.3%
7.1
69.4%
4.0
38.9%
9.3
10.2%
-10.0%
6.2
66.8%
3.0
32.1%
7.2
-14.4%
-22.5%
6.1
84.6%
3.0
42.2%
35.1
0.9%
7.0
-15.7%
-2.0%
6.1
85.9%
2.9
40.6%
23.8
68.2%
9.8
28.0%
24.8
70.5%
12.1
34.3%
How the stock reacted: Shares traded up 4.8% vs. up 0.3% for the S&P
CDW reported June-quarter sales and adjusted EPS of $3.66bn and $0.93 beat our estimates of $3.59bn and $0.86 (vs. consensus
of $3.65bn and $0.85). We maintain our positive stance on CDW shares following a good first quarter despite a mixed demand
picture. Sales to medium-and-large corporate customers (40% of sales) continued to be sluggish, down 2% y/y, but this was
largely offset by robust demand within CDW's education and government verticals, which grew low double-digits. Indeed,
CDW's diversified portfolio of customers across commercial and public sectors enables it to withstand volatile movements
within specific end markets, in our opinion. While management expects corporate demand to pickup in the second half, it now
expects overall IT spending in N. America to come in at the low end of previous expectations for 2-3% growth. It still expects to
outgrow the market by 200-300bp and continues to invest in sales and technical-support staff to help take share in a very
fragmented market. We tweaked forward estimates, raising FY17 EPS to $3.61 from $3.59, and raised our PT from $46 to $48,
which represents 13.5x FY17 EPS
Risk to Target Price: Our 12-month target price of $48 is based on ~13.5x our FY17 non-GAAP EPS estimate of $3.61, or
~10x FY17E EV/EBITDA. Risks to our target price include decline in technology spending; pricing pressure among peers,
particularly in softer demand environments; technology disruption (including the migration to cloud computing among small
business customers); lack of acquisition experience; and relatively heavy debt burden.
Page 5
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
Quarterly Sales By Segment (1Q14-2Q16)
$ in millions
Q1-Mar-14
Q2-Jun-14
Q3-Sep-14
Q4-Dec-14
Q1-Mar-15
Q2-Jun-15
Q3-Sep-15
Q4-Dec-15
Q1-Mar-16
Q2-Jun-16
Corporate:
Medium/Large
1,296.4
1,417.7
1,396.6
1,467.6
1,341.9
1,521.3
1,490.6
1,521.5
1,410.7
1,489.0
% of sales
48.9%
45.6%
42.8%
48.1%
48.7%
45.9%
42.6%
44.5%
45.3%
40.6%
q/q
-2.0%
9.4%
-1.5%
5.1%
-8.6%
13.4%
-2.0%
2.1%
-7.3%
5.6%
y/y
9.8%
8.3%
12.5%
11.0%
3.5%
7.3%
6.7%
3.7%
5.1%
-2.1%
Small Business
239.8
270.0
256.9
259.0
268.5
277.3
274.1
273.1
281.6
290.2
% of sales
9.0%
8.7%
7.9%
8.5%
9.7%
8.4%
7.8%
8.0%
9.0%
7.9%
q/q
3.9%
12.6%
-4.9%
0.8%
3.7%
3.3%
-1.2%
-0.4%
3.1%
3.1%
y/y
7.3%
18.0%
14.4%
12.3%
12.0%
2.7%
6.7%
5.4%
4.9%
4.7%
$1,536.2
$1,687.7
$1,653.5
$1,726.6
$1,610.4
$1,798.6
$1,764.7
$1,794.6
$1,692.3
$1,779.2
Total Corporate
Public:
Govt.
259.5
319.5
449.4
447.5
294.2
390.8
493.9
522.0
339.9
456.6
% of sales
9.8%
10.3%
13.8%
14.7%
10.7%
11.8%
14.1%
15.3%
10.9%
12.5%
q/q
-20.7%
23.1%
40.7%
-0.4%
-34.3%
32.8%
26.4%
5.7%
-34.9%
34.3%
y/y
2.9%
8.0%
19.7%
36.7%
13.4%
22.3%
9.9%
16.6%
15.5%
16.8%
Education
323.8
529.9
639.0
346.0
345.4
548.9
583.3
341.2
341.0
640.0
% of sales
12.2%
17.1%
19.6%
11.3%
12.5%
16.6%
16.7%
10.0%
10.9%
17.5%
q/q
14.5%
63.7%
20.6%
-45.9%
-0.2%
58.9%
6.3%
-41.5%
-0.1%
87.7%
y/y
39.4%
26.0%
24.5%
22.3%
6.7%
3.6%
-8.7%
-1.4%
-1.3%
16.6%
398.7
435.8
398.7
390.5
377.6
448.8
406.7
430.8
388.5
450.4
15.0%
14.0%
12.2%
12.8%
13.7%
13.5%
11.6%
12.6%
12.5%
12.3%
15.9%
Healthcare
% of sales
q/q
4.8%
9.3%
-8.5%
-2.1%
-3.3%
18.9%
-9.4%
5.9%
-9.8%
y/y
10.0%
19.0%
12.0%
2.7%
-5.3%
3.0%
2.0%
10.3%
2.9%
0.4%
$982.0
$1,285.2
$1,487.1
$1,184.0
$1,017.2
$1,388.5
$1,483.9
$1,294.0
$1,069.4
$1,547.0
134.1
133.1
125.5
139.5
127.6
126.9
252.5
329.8
355.0
338.4
5.1%
4.3%
3.8%
4.6%
4.6%
3.8%
7.2%
9.6%
11.4%
9.2%
-21.0%
-0.7%
-5.7%
11.2%
-8.5%
-0.5%
99.0%
30.6%
7.6%
-4.7%
Total Public
Other (inc. Kelway)
% of sales
q/q
.
y/y
-16.7%
-16.4%
-18.5%
-17.8%
-4.8%
-4.7%
101.2%
136.4%
178.2%
166.7%
$2,652.3
$3,106.0
$3,266.1
$3,050.1
$2,755.2
$3,314.0
$3,501.1
$3,418.4
$3,116.7
$3,664.6
q/q
-2.2%
17.1%
5.2%
-6.6%
-9.7%
20.3%
5.6%
-2.4%
-8.8%
17.6%
y/y
10.0%
11.8%
14.0%
12.4%
3.9%
6.7%
7.2%
12.1%
13.1%
10.6%
Total Net sales
Note: There were 64 selling days in 2Q16 and 63 days in 2Q15. Reflect changes due to sales move from Small Business to Medium/Large business.
Note: Kelway contribution is included the "other" segment.
Source: Company reports

How the stock reacted: Shares traded up 3.7% vs. up 0.3% for the S&P
Insight (NSIT) reported June quarter (F2Q16) revenue and adjusted-EPS of $1.46bn (up 25% q/q, up 2% y/y, and up 3% y/y
ex-FX) and $0.97, significantly above our estimates of $1.40bn and $0.75. : Insight posted impressive Q2 results, with revenue
and adjusted EPS of $1.46bn and $0.97 well above our estimates of $1.4bn and $0.75. Operating margin was a strong 4%, the
best performance in several quarters, due to strong gross margin (largely due to mix) and benefits from a $20mn cost-cutting
program. Although Insight took up its full year guidance to $2.42 at the midpoint, from $2.30, the guidance implies a drop in
EBIT margin to well below 3%, as Insight expects lower software sales, which will negatively impact gross margin. It also expects
some FX headwinds due to its exposure to the U.K. We raise our FY16E EPS to $2.43 from $2.26 and FY17E EPS to $2.57
from $2.49.
Insight North America
Sales ($mn)
Q/Q growth
Y/Y growth
Gross margin
Operating margin
Jun-15
$978.7
19.0%
10.1%
13.1%
3.0%
Sep-15
$1,022.4
4.5%
14.7%
13.3%
3.1%
Dec-15
$999.7
(2.2%)
(0.2%)
12.6%
2.4%
Mar-16
$826.9
(17.3%)
0.5%
13.5%
1.4%
Jun-16
Comments
$1,036.3 Growth in large enterprise
25.3% Hardware sales up 8% (strength in devices, server, storage)
5.9%
Software up 3% y/y; driver of margin growth
13.8%
4.0%
Source: Company reports
Page 6
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
Insight EMEA
Sales ($mn)
Q/Q growth
Y/Y growth
Gross margin
Operating margin
Jun-15
$380.6
7.3%
(14.8%)
13.9%
2.6%
Sep-15
$293.6
(22.9%)
(6.4%)
13.9%
0.4%
Dec-15
$342.0
16.5%
(12.6%)
13.9%
2.1%
Mar-16
$303.4
(11.3%)
(14.5%)
14.3%
0.9%
Jun-15
$64.8
53.7%
(20.8%)
16.0%
6.4%
Sep-15
$26.1
(59.7%)
(20.0%)
20.3%
0.1%
Dec-15
$45.4
73.8%
(14.6%)
16.1%
4.4%
Mar-16
$38.7
(14.7%)
(8.1%)
15.3%
1.4%
Jun-16
$361.7
19.2%
(5.0%)
15.2%
3.3%
Comments
Down 2% y/y ex-FX
Weakness in the UK hardware
Greater mix in software drove margins
Source: Company reports
Insight Asia-Pac
Sales ($mn)
Q/Q growth
Y/Y growth
Gross margin
Operating margin
Jun-16
Comments
$58.3
Higher mix in cloud and software sales drove margins
50.4%
(10.0%)
18.5%
8.5%
Source: Company reports

How the stock reacted: Shares traded up 14.4% vs. flat for the S&P
Littelfuse reported Jun-Q revenue of $271.9mn was roughly in line with our expectation, and EPS was two cents above of our
$1.42 estimate. Sep-Q guide of down ~2% q/q at midpoint was below our estimates on incremental weakness from the solar, oil
& gas and mining markets. Although the company is seeing healthy trends from Asian and European automotive customers, the
decline in N. American heavy truck market is impacting it negatively. In addition, the exit of certain lower margin sensor
products is expected to impact y/y comps until Q1 next year. On the positive side, acquisition of PolySwitch is tracking in-line to
modestly ahead of expectation with the deal expected to be modestly accretive in the Sep-Q (excluding amortization expenses).
Management remains on track to expand op-margin in the core business (ex-M&A) by about 150bp in FY16, and is further
looking to realign costs in industrial which has been seeing weakness for last several quarters. We revise our FY16 EPS estimates
to $5.60 (from $5.61) and FY17 to $6.30 (from $6.18), which now includes $8.5mn in annual negative impact from amortization
expenses (vs. prior expectations of ~$12mn). Shares are trading at ~19x our forward estimates or ~12x EBITDA, slightly above
its peers; we maintain our Hold rating.
Electronics Segment (49% of total sales)
Revenue ($mn)
Non-GAAP Operating Margin
Strengths
Weaknesses
change y/y
$132
25.2%
19.1%
-189 bp
Europe and China; N. America Stable
Japan and Korea
change q/q
33.8%
-358 bp
So urce: Co mpany data, Stifel
Automotive Segment (41% of total sales)
Revenue ($mn)
Non-GAAP Operating Margin
Strengths
Weaknesses
change y/y
change q/q
$111
29.6%
21.1%
14.8%
5 bp
-423 bp
Asia and Europe; passenger car fuses & sensors
Commercial vehicles in N. America
So urce: Co mpany data, Stifel
Page 7
Technology Supply Chain
August 8, 2016
Stifel
SPOTLIGHT: Final Take on Q2 Earnings
Industrial Segment (10% of total sales)
Revenue ($mn)
Non-GAAP Operating Margin
Strengths
Weaknesses
change y/y
$28
(7.1%)
7.1%
-827 bp
Some strength in Asia and Europe
Solar, Mining (potash), and Oil & Gas
So urce: Co mpany data, Stifel

How the stock reacted: Shares traded down 6.7% vs. flat for the S&P
Page 8
change q/q
(1.0%)
131 bp
Technology Supply Chain
August 8, 2016
Stifel
News
PLXS Roadshow Highlights: New Program Wins Should Drive Strong Top-Line Growth in FY17
We hosted investor meetings last week with Plexus’ incoming CEO Todd Kelsey and CFO Patrick Jermain. The roadshow
follows the EMS company's recent earnings results and upbeat outlook on revenue growth and further margin expansion. The
meetings centered around new business pipeline, operating leverage, capital allocation, and Plexus' ability to sustain its
competitive advantage. We believe the company continues to execute well in a mixed demand environment by focusing on its key
verticals (medical, defense/aero and industrial), which should enable it to grow above markets. Indeed, at its analyst day in June,
PLXS management laid out plans to grow at CAGR of ~12% over the next several years. Consensus estimates peg FY17 top-line
growth at ~9%, and EPS of $3.28. Double-digit sales growth could drive EPS in the range of $3.40-$3.50, by our estimate, but at
this point that appears to be an ambitious target. We maintain our Hold rating on valuation, with shares trading at 14x forward
earnings, a deserved premium to its peer group.
Page 9
Technology Supply Chain
August 8, 2016
Stifel
Valuations
Technology Supply Chain Valuation Comparison
EMS/PCB
Celestica Inc.
Flex
Jabil Circuit
Plexus Corp.
TTM Technologies
Components & Connectors
AVX Corp
Kemet Corp
Littelfuse Inc.
Vishay Intertechnology
Amphenol
Sensata
TE Connectivity Ltd.
IT Technology Distribution
Arrow Electronics
Avnet
Ingram Micro
CDW Corp.
ePlus inc.
Insight Enterprises
Tech Data
Synnex
Ticker
Stifel
Rating
8/5/2016
Price
52 Wk
Hi
52 Wk
LO
%
off HI
Shares
Out.
Market
Cap.
Ent.
Value
CLS
FLEX
JBL
PLXS
TTMI
H
B
H
H
B
$11.14
$12.65
$20.72
$46.15
$10.49
$13.42
$13.37
$26.00
$46.88
$10.59
$8.07
$8.85
$16.78
$28.72
$4.67
-17.0%
-5.4%
-20.3%
-1.6%
-0.9%
144.1
551.0
193.1
33.8
100.4
$1,605
$6,971
$4,000
$1,561
$1,053
$1,428
$8,050
$5,264
$1,391
$1,914
9.5x
10.7x
13.1x
15.6x
9.7x
8.9x
9.7x
9.1x
13.8x
9.1x
0.2x
0.3x
0.3x
0.5x
0.8x
0.2x
0.3x
0.3x
0.5x
0.7x
5.1x
6.4x
4.2x
8.1x
5.4x
AVX
KEM
LFUS
VSH
APH
ST
TEL
H
H
H
B
H
B
B
$13.56
$3.37
$118.42
$13.50
$59.92
$37.94
$58.98
$14.32
$3.62
$126.32
$13.51
$60.50
$52.58
$67.99
$10.43
$1.26
$82.53
$9.22
$44.50
$29.92
$51.70
-5.3%
-6.9%
-6.3%
-0.1%
-1.0%
-27.8%
-13.3%
167.6
52.1
22.7
150.6
315.4
171.5
361.0
$2,273
$176
$2,685
$2,033
$18,899
$6,507
$21,292
$1,215
$509
$2,870
$1,700
$20,940
$9,600
$24,634
18.7x
15.6x
21.2x
15.2x
22.9x
13.2x
14.2x
17.1x
9.6x
18.8x
13.1x
21.3x
11.8x
13.8x
1.0x
0.7x
2.8x
0.7x
3.4x
3.0x
2.0x
1.0x
0.7x
2.6x
0.7x
3.3x
3.0x
1.9x
ARW
AVT
IM
CDW
PLUS
NSIT
TECD
SNX
B
B
H
B
H
H
H
H
$65.19
$40.67
$33.89
$44.73
$84.96
$30.49
$78.01
$101.40
$68.07
$46.95
$36.66
$46.92
$109.33
$32.77
$83.51
$103.11
$45.23
$36.42
$23.79
$30.40
$61.78
$18.26
$54.88
$72.06
-4.2%
-13.4%
-7.6%
-4.7%
-22.3%
-7.0%
-6.6%
-1.7%
92.7
131.7
154.7
168.9
7.1
36.6
35.4
39.5
$6,043
$5,354
$5,244
$7,555
$604
$1,116
$2,759
$4,003
$8,277
$6,635
$5,680
$10,666
$572
$1,028
$2,300
$4,128
9.7x
10.5x
12.8x
13.4x
12.9x
12.5x
12.6x
16.1x
9.1x
8.6x
11.9x
12.4x
12.1x
11.8x
12.2x
16.0x
0.3x
0.3x
0.1x
0.8x
0.5x
0.2x
0.1x
0.3x
CY15
Revenue
CY16E
CY17E
CY15
Estimates
EPS
CY16E
CY17E
CY15
EBITDA
CY16E
CY17E
Cash
Debt
$0.92
$1.12
$2.39
$2.54
$0.87
$1.17
$1.18
$1.58
$2.96
$1.08
$1.25
$1.31
$2.28
$3.34
$1.15
$257
$1,223
$1,299
$158
$286
$280
$1,254
$1,256
$172
$353
$294
$1,319
$1,421
$194
$355
$473
$1,679
$887
$434
$216
$0.78
$0.11
$5.05
$0.70
$2.43
$2.75
$3.55
$0.72
$0.22
$5.60
$0.89
$2.62
$2.87
$4.16
$0.80
$0.35
$6.30
$1.03
$2.82
$3.22
$4.27
$214
$86
$191
$354
$1,282
$717
$2,537
$190
$97
$223
$366
$1,410
$812
$2,559
$214
$105
$247
$391
$1,502
$859
$2,652
$6.18
$4.54
$2.63
$2.96
$5.98
$2.11
$5.69
$6.25
$6.69
$3.89
$2.64
$3.33
$6.57
$2.43
$6.17
$6.32
$7.12
$4.73
$2.84
$3.61
$7.04
$2.57
$6.40
$6.32
$1,049
$1,064
$774
$1,018
$79
$170
$352
$466
$1,118
$897
$791
$1,092
$83
$190
$365
$481
$1,168
$1,045
$849
$1,164
$90
$197
$383
$489
EMS
Celestica Inc.
$5,639
$5,937
$6,174
Flex
$24,598
$23,950
$24,492
Jabil Circuit
$18,588
$17,682
$18,600
Plexus Corp.
$2,606
$2,635
$2,856
TTM Technologies
$2,095
$2,480
$2,566
Components & Connectors
AVX Corp
$1,207
$1,236
$1,264
Kemet Corp
$745
$742
$760
Littelfuse Inc.
$868
$1,024
$1,103
Vishay Intertechnology
$2,298
$2,335
$2,407
Amphenol
$5,569
$6,167
$6,419
Sensata
$2,975
$3,206
$3,206
TE Connectivity Ltd.
$12,017
$12,457
$12,657
IT Technology Distribution
Arrow Electronics
$23,282
$24,098
$24,707
Avnet
$27,351
$25,212
$26,047
Ingram Micro
$43,026
$41,832
$42,801
CDW Corp.
$12,989
$14,057
$14,847
ePlus inc.
$1,172
$1,255
$1,321
Insight Enterprises
$5,373
$5,578
$5,790
Tech Data
$26,332
$26,830
$27,470
Synnex
$13,313
$13,784
$14,315
Stifel Rating Legend: B = Buy, H = Hold, S = Sell, and NR = Rating Suspended
Source:First Call, Company Reports and Stifel estimates
Matt Sheerin, Analyst
Nikhil Kumar, CFA, Associate
Alvin J Park, CFA, Associate
212.271.3753
212.271.3635
212.271.3809
Page 10
Price/Earnings
CY16E
CY17E
TEV/Sales
CY16E
CY17E
Ent. Val./EBITDA
CY16E
CY17E
TBV
Price/
TBV
4.9x
6.1x
3.7x
7.2x
5.4x
$7.74
$2.44
$8.28
$26.19
$8.21
1.4x
5.2x
2.5x
1.8x
1.3x
6.4x
5.2x
12.9x
4.6x
14.8x
11.8x
9.6x
5.7x
4.8x
11.6x
4.3x
13.9x
11.2x
9.3x
$11.43
$0.30
$9.87
$7.28
$8.35
1.2x
11.3x
12.0x
1.9x
7.1x
0.3x
0.3x
0.1x
0.7x
NA
0.2x
0.1x
0.3x
7.4x
7.4x
7.2x
9.8x
6.9x
5.4x
6.3x
8.6x
7.1x
6.3x
6.7x
9.2x
6.4x
5.2x
6.0x
8.4x
$17.96
$26.32
$17.61
$36.17
$16.51
$51.40
$39.93
3.6x
1.5x
1.9x
2.3x
1.8x
1.5x
2.5x
Net Cash/
(Net Debt)
Equity
Inv.
Turns
ROE
Short
Interest
%
Short
$296
$2,759
$2,151
$263
$1,078
$1.23
($1.96)
($6.55)
$5.05
($8.58)
$1,162
$2,667
$2,492
$895
$830
6.2x
6.2x
7.0x
4.3x
7.4x
14.4%
22.3%
5.1%
12.5%
13.7%
0.63
6.95
5.89
0.47
7.37
0.4%
1.3%
3.1%
1.4%
7.3%
$1,058
$53
$183
$1,021
$794
$309
$694
$0
$386
$368
$688
$2,835
$3,402
$4,036
$6.31
($6.39)
($8.14)
$2.21
($6.47)
($18.03)
($9.26)
$2,186
$88
$775
$1,328
$3,574
$1,788
$8,265
2.0x
3.4x
5.4x
4.3x
4.5x
6.2x
5.1x
5.9%
15.0%
16.9%
10.3%
23.1%
27.8%
18.9%
1.20
2.38
0.51
21.52
5.03
9.61
3.48
0.7%
4.6%
2.3%
14.3%
1.6%
5.6%
1.0%
$496
1,036
$879
$129
$79
$175
$826
$591
$2,730
2,317
$1,315
$3,241
$47
$87
$367
$716
($24.11)
($9.73)
($2.82)
($18.42)
$4.46
$2.40
$12.98
($3.17)
$4,449
$4,760
$4,064
$1,013
$310
$681
$2,135
$1,875
8.4x
7.7x
10.1x
0.0x
15.8x
34.2x
10.8x
9.0x
0.0%
11.1%
9.1%
0.0%
14.2%
20.9%
6.9%
11.6%
1.93
3.63
1.34
4.82
0.24
0.53
3.11
1.59
2.1%
2.8%
0.9%
2.9%
3.4%
1.5%
8.8%
4.0%
8/5/2016
Technology Supply Chain
August 8, 2016
Stifel
Important Disclosures and Certifications
I, Matthew Sheerin, certify that the views expressed in this research report accurately reflect my personal views
about the subject securities or issuers; and I, Matthew Sheerin, certify that no part of my compensation was, is, or
will be directly or indirectly related to the specific recommendations or views contained in this research report. Our
European Policy for Managing Research Conflicts of Interest is available at www.stifel.com.
For applicable current disclosures for all covered companies please visit the Research Page at www.stifel.com or write to the
Stifel Research Department at the following address.
US Research
Stifel Research Department
Stifel, Nicolaus & Company, Inc.
One South Street
16th Floor
Baltimore, Md. 21202
The equity research analyst(s) responsible for the preparation of this report receive(s) compensation based on various factors,
including Stifel’s overall revenue, which includes investment banking revenue.
Our investment rating system is three tiered, defined as follows:
BUY -We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price
change plus dividend yield.
HOLD -We expect a total return between -5% and 10% over the next 12 months with total return equal to the percentage price
change plus dividend yield.
SELL -We expect a total return below -5% over the next 12 months with total return equal to the percentage price change plus
dividend yield.
Occasionally, we use the ancillary rating of SUSPENDED (SU) to indicate a long-term suspension in rating and/or target price,
and/or coverage due to applicable regulations or Stifel policies. SUSPENDED indicates the analyst is unable to determine a
“reasonable basis” for rating/target price or estimates due to lack of publicly available information or the inability to quantify the
publicly available information provided by the company and it is unknown when the outlook will be clarified. SUSPENDED may
also be used when an analyst has left the firm.
Of the securities we rate, 49% are rated Buy, 42% are rated Hold, 3% are rated Sell and 6% are rated Suspended.
Within the last 12 months, Stifel or an affiliate has provided investment banking services for 15%, 7%, 0% and 13% of the
companies whose shares are rated Buy, Hold, Sell and Suspended, respectively.
Additional Disclosures
Please visit the Research Page at www.stifel.com for the current research disclosures and respective target price
methodology applicable to the companies mentioned in this publication that are within Stifel's coverage universe. For a
discussion of risks to target price please see our stand-alone company reports and notes for all Buy-rated and Sell-rated
stocks.
The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is
not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to
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which is authorized and regulated by the Financial Conduct Authority (“FCA”), (FRN 190412) and is a member of the London
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© 2016 Stifel. This report is produced for the use of Stifel customers and may not be reproduced, re-distributed or passed to
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The recommendation contained in this report was produced at 7 August 2016 22:38EDT and disseminated at 7 August 2016 22:38EDT
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