Arrow Electronics Teams With Customers And Suppliers To Bring Smart Technology To Affordable Housing Market

If you're interested in broad exposure to the Mid Cap Value segment of the US equity market, look no further than the Invesco S&P MidCap Value with Momentum ETF (XMVM), a passively managed exchange traded fund launched on 03/03/2005.

The fund is sponsored by Invesco. It has amassed assets over $280.53 million, making it one of the smaller ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus they have a nice balance of growth potential and stability.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.39%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 1.26%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 37.10% of the portfolio. Consumer Discretionary and Energy round out the top three.

Looking at individual holdings, Lithia Motors Inc (LAD) accounts for about 2.72% of total assets, followed by Avnet Inc (AVT) and Arrow Electronics Inc (ARW).

The top 10 holdings account for about 19.82% of total assets under management.

Performance and Risk

XMVM seeks to match the performance of the S&P MIDCAP 400 HIGH MOMENTUM VALUE INDEX before fees and expenses. The S&P MidCap 400 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell Midcap Index.

The ETF has added about 20.98% so far this year and was up about 35.45% in the last one year (as of 11/07/2024). In the past 52-week period, it has traded between $43.85 and $60.33.

The ETF has a beta of 1.16 and standard deviation of 22.53% for the trailing three-year period. With about 82 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap Value with Momentum ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XMVM is a reasonable option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $13.93 billion in assets, Vanguard Mid-Cap Value ETF has $18.40 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

Arrow Electronics ARW reported third-quarter 2024 adjusted earnings of $2.38 per share, which beat the Zacks Consensus Estimate by 6.73%. However, the bottom line declined 42.5% year over year due to lower revenues, cyclical headwinds and unfavorable foreign currency exchange rates.

In the third quarter, ARW reported revenues of $6.82 billion, down 14.78% from the year-ago quarter’s level. However, the top line beat the Zacks Consensus Estimate by 1.21%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Arrow Electronics, Inc. Price, Consensus and EPS Surprise

Arrow Electronics, Inc. price-consensus-eps-surprise-chart | Arrow Electronics, Inc. Quote

Third-Quarter Details

In the third quarter of 2024, Global Component sales decreased 20.8% year over year to $4.9 billion, primarily due to the prolonged semiconductor inventory correction. Region-wise, the segment’s revenues from EMEA declined 35.1%, as well as sales from the Americas and Asia-Pacific regions plunged 12.3% and 15.49%, respectively.

Global Enterprise Computing Solutions (ECS) revenues were $1.87 billion, which increased 6.5% year over year. Region-wise, the segment’s revenues from America and EMEA increased 1.6% and 13.17%, respectively.

The non-GAAP operating income from Global Components and Global ECS was $189 million and $76 million, respectively.

Arrow Electronics’ non-GAAP operating income plunged 43.3% to $215 million in the third quarter of 2024 from the year-ago quarter. The non-GAAP operating margin shrunk 150 basis points to 3.2%.

Balance Sheet and Cash Flow

Arrow Electronics exited the third quarter with cash and cash equivalents of $248 million compared with the previous quarter’s $213 million.

The long-term debt was $2.36 billion, down from $2.48 billion at the end of the previous quarter.

The New York-based electronic component distributor generated $80.55 million in cash from operating activities in the reported quarter.

In the third quarter of 2024, ARW returned $50 million to its shareholders through share repurchases. It has approximately $375 million remaining under its current share repurchase authorization.

Fourth-Quarter 2024 Guidance

For the fourth quarter of 2024, sales are estimated between $6.67 billion and $7.27 billion.

Global Components sales are projected in the band of $4.5 billion and $4.9 billion.

Global ECS sales are anticipated to be between $2.17 billion and $2.37 billion.

Interest expenses are expected to be between $60 million and $65 million. As a result, the company projects non-GAAP earnings per share in the band of $2.48-$2.68.

ARW expects changes in foreign currencies to be immaterial for the fourth-quarter sales and earnings.

Zacks Rank & Stocks to Consider

Currently, Arrow Electronics carries a Zacks Rank #3 (Hold).

Monday.com MNDY, Palo Alto Networks PANW and BlackLine BL are some better-ranked stocks that investors can consider in the broader sector. MNDY and BL each sport a Zacks Rank #1 (Strong Buy), while PANW carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of MNDY have gained 56.4% year to date. The company is set to report third-quarter 2024 results on Nov. 11.

Shares of PANW have climbed 22.2% year to date. It is slated to report first-quarter fiscal 2025 results on Nov. 20.

Shares of BL have lost 11.3% year to date. The company is set to report third-quarter 2024 results on Nov. 7.

Zacks Investment Research