We upgrade our recommendation for Brightpoint Inc. (CELL) to Outperform, following its fourth quarter of 2010 financial results, which was well above the Zacks Consensus Estimate. Significant growth of 3G smartphones throughout the world helped Brightpoint to manage a record-high wireless device in the reported quarter. Most importantly, almost 82% of these mobile devices are managed through the company’s high-margin logistic services. According to our view, business fundamentals of Brightpoint remain intriguing primarily due to growing global demand for 3G smart-phones.
The impetus for continued financial improvement remains Brightpoint’s diversity, as the company provides a full range of sales & distribution, logistics, and activation services while expanding on a global basis. Management predicted that for fiscal 2011, the company will supply wireless devices within the range of 111 million – 114 million, up 12% – 14% year over year. Distribution average selling price was $190 in the last quarter, up 22% year over year, depicting favorable product-mix toward costlier smartphones.
Recently, Brightpoint completed the acquisition of a privately held company Touchstone Wireless Repair and Logistics, a leading provider of repair and reverse logistics services, to the wireless industry. Brightpoint paid $80 million in cash for this acquisition and expects this deal to be accretive to its fiscal 2011 EPS. The company is now expected to integrate Touchstone’s state-of-the-art asset management and product recycling activities to offer a whole bunch of innovative supply-chain management systems in more than 25 countries.
Brightpoint has a solid global customer base. The company entered into agreements with large telecom equipment and services corporations, such as like Research In Motion Ltd. (RIMM), HTC Corp, and Nokia Corp. (NOK), for the distribution of handheld devices.