Press Release: Scansource To Present At The Raymond James Tmt And Consumer Conference

What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official hinted at a potential interest rate cut in December. 

John Williams, president of the Federal Reserve Bank of New York, signaled he was open to lowering the fed funds rate—the key interest rate that banks charge each other for overnight loans—to support the job market. Speaking at an event, Williams stated that he sees “room for a further adjustment” for interest rates, which immediately shifted market expectations. Following his remarks, the perceived likelihood of an interest rate cut at the Federal Reserve's December meeting flipped from unlikely to more likely than not. The prospect of lower borrowing costs sent a wave of optimism through the markets, leading to a rally in major indices like the S&P 500, Dow Jones Industrial Average, and the Nasdaq Composite.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Electronic Components & Manufacturing company Plexus jumped 4.3%. Is now the time to buy Plexus? Access our full analysis report here, it’s free for active Edge members.
• Hardware & Infrastructure company Dell jumped 4.9%. Is now the time to buy Dell? Access our full analysis report here, it’s free for active Edge members.
• IT Distribution & Solutions company Avnet jumped 4.3%. Is now the time to buy Avnet? Access our full analysis report here, it’s free for active Edge members.
• Hardware & Infrastructure company NetApp jumped 4.7%. Is now the time to buy NetApp? Access our full analysis report here, it’s free for active Edge members.
• IT Distribution & Solutions company ScanSource jumped 5%. Is now the time to buy ScanSource? Access our full analysis report here, it’s free for active Edge members.

Zooming In On ScanSource (SCSC)

ScanSource’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 3 months ago when the stock gained 12.6% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.

ScanSource is down 16% since the beginning of the year, and at $39.52 per share, it is trading 25.6% below its 52-week high of $53.11 from December 2024. Investors who bought $1,000 worth of ScanSource’s shares 5 years ago would now be looking at an investment worth $1,561.

ScanSource’s third quarter results were met with a negative market reaction, as sales came in below Wall Street expectations and declined year over year. Management attributed the underperformance largely to continued weakness in Brazil and the effects of reporting more netted down revenue, particularly in the company’s Specialty Technology Solutions segment. CEO Mike Baur acknowledged that while some technology categories grew in North America, certain legacy areas remained in decline, tempering overall top-line momentum. Baur highlighted ongoing gross profit margin improvements and growth in recurring revenue, stating, “Each of our segments achieved year-over-year gross profit growth and higher EBITDA margins.”

Is now the time to buy SCSC? Find out in our full research report (it’s free for active Edge members).

ScanSource (SCSC) Q3 CY2025 Highlights:

• Revenue: $739.7 million vs analyst estimates of $787.4 million (4.6% year-on-year decline, 6.1% miss)
• Adjusted EPS: $1.06 vs analyst estimates of $0.93 (14% beat)
• Adjusted EBITDA: $38.59 million vs analyst estimates of $35.03 million (5.2% margin, 10.2% beat)
• The company reconfirmed its revenue guidance for the full year of $3.2 billion at the midpoint
• EBITDA guidance for the full year is $155 million at the midpoint, above analyst estimates of $150.8 million
• Operating Margin: 3.6%, in line with the same quarter last year
• Market Capitalization: $910 million

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From ScanSource’s Q3 Earnings Call

• Adam Tindle (RJ): asked about the sequential growth expectations for the next quarter and whether large deals are driving the outlook. CFO Steve Jones explained that lapping last year’s netted down revenue and improved April trends provide confidence in the guidance.
• Adam Tindle (RJ): inquired about the reasoning and timing behind the new $200 million share repurchase authorization versus prioritizing acquisitions. CEO Mike Baur said acquisitions of high-margin businesses are a higher priority but that the company can pursue both initiatives depending on leverage.
• Greg Burns (Sidoti): requested more detail on Brazil’s demand trends and how netted down revenue affects reported sales. Jones clarified that macro and FX pressures are present, but profitability is protected due to local cost structures, and netting down revenue is a headwind for reported top-line growth.
• Keith Housum (Northcoast Research): questioned the apparent disconnect between reported North American growth in some technologies and overall segment declines. Baur acknowledged that legacy product declines and netted down revenue obscure growth in newer categories.
• Guy Hardwick (Freedom Capital Markets): asked about the competitive environment for acquisitions and whether higher interest rates have made deals more attractive. Baur said pricing discipline remains, but a wide pipeline of targets is available, with earn-out structures helping mitigate risk.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the pace and integration of new acquisitions in emerging, high-margin segments, (2) the continued growth in recurring revenue streams from advisory and AI-enabled services, and (3) stabilization or improvement in Brazil’s demand environment. Execution of the Integrated Solutions Group’s new business development initiatives and onboarding innovative suppliers will also be important markers for sustained profitability and growth.

ScanSource currently trades at $41.53, in line with $41.83 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

Our Favorite Stocks Right Now

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return).

As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the it distribution & solutions industry, including ePlus and its peers.

IT Distribution & Solutions will be buoyed by the increasing complexity of IT ecosystems, rising cloud adoption, and demand for cybersecurity solutions. Enterprises are less likely than ever to embark on these complicated journeys solo, and companies in the sector boast expertise and scale in these areas. However, cloud migration also means less need for hardware, which could dent demand for large portions of the product portfolio and hurt margins. Additionally, planning for potentially supply chain disruptions is ongoing, as the COVID-19 pandemic showed how damaging a pause in global trade could be in areas like semiconductor procurement.

The 8 it distribution & solutions stocks we track reported a satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 1.3% while next quarter’s revenue guidance was in line.

While some it distribution & solutions stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.3% since the latest earnings results.

Best Q3: ePlus

Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.

ePlus reported revenues of $608.8 million, up 23.4% year on year. This print exceeded analysts’ expectations by 17.5%. Overall, it was an incredible quarter for the company with a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.

"Fiscal 2026 is off to a very strong start as the strength from the first quarter carried into the second quarter, with net sales growing 23.4% and diluted EPS increasing almost 63%. This quarter marks an important milestone for ePlus, as we posted quarterly gross billings exceeding $1 billion for the first time in our history. Our second-quarter performance reflects steady progress in executing our strategic priorities as we reported double-digit growth in key financial metrics: revenue, gross profit, net earnings from continuing operations, Adjusted EBITDA and EPS," commented Mark Marron, president and CEO of ePlus.

ePlus pulled off the biggest analyst estimates beat and fastest revenue growth of the whole group. Unsurprisingly, the stock is up 20.2% since reporting and currently trades at $88.25.

Is now the time to buy ePlus? Access our full analysis of the earnings results here, it’s free for active Edge members.

TD SYNNEX

Serving as the crucial middleman in the technology supply chain, TD SYNNEX is a global technology distributor that connects thousands of IT manufacturers with resellers, helping businesses access hardware, software, and technology solutions.

TD SYNNEX reported revenues of $15.65 billion, up 6.6% year on year, outperforming analysts’ expectations by 3.5%. The business had a stunning quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ EPS guidance for next quarter estimates.

The market seems content with the results as the stock is up 3.3% since reporting. It currently trades at $155.34.

Is now the time to buy TD SYNNEX? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: Connection

Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.

Connection reported revenues of $709.1 million, down 2.2% year on year, falling short of analysts’ expectations by 4.7%. It was a disappointing quarter as it posted a significant miss of analysts’ revenue and EPS estimates.

As expected, the stock is down 4.3% since the results and currently trades at $58.18.

Read our full analysis of Connection’s results here.

ScanSource

Operating as a crucial link in the technology supply chain since 1992, ScanSource is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

ScanSource reported revenues of $739.7 million, down 4.6% year on year. This number lagged analysts' expectations by 6.1%. Aside from that, it was a satisfactory quarter as it also recorded a beat of analysts’ EPS estimates but a significant miss of analysts’ revenue estimates.

ScanSource had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 1.3% since reporting and currently trades at $41.29.

Read our full, actionable report on ScanSource here, it’s free for active Edge members.

CDW

Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.

CDW reported revenues of $5.74 billion, up 4% year on year. This print was in line with analysts’ expectations. Zooming out, it was a mixed quarter as it also logged a beat of analysts’ EPS estimates but revenue in line with analysts’ estimates.

The stock is down 7.4% since reporting and currently trades at $143.31.

Read our full, actionable report on CDW here, it’s free for active Edge members.

Market Update

As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.

Technology distribution company ScanSource missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 4.6% year on year to $739.7 million. On the other hand, the company’s full-year revenue guidance of $3.2 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $1.06 per share was 14% above analysts’ consensus estimates.

Is now the time to buy SCSC? Find out in our full research report (it’s free for active Edge members).

ScanSource (SCSC) Q3 CY2025 Highlights:

• Revenue: $739.7 million vs analyst estimates of $787.4 million (4.6% year-on-year decline, 6.1% miss)
• Adjusted EPS: $1.06 vs analyst estimates of $0.93 (14% beat)
• Adjusted EBITDA: $38.59 million vs analyst estimates of $35.03 million (5.2% margin, 10.2% beat)
• The company reconfirmed its revenue guidance for the full year of $3.2 billion at the midpoint
• EBITDA guidance for the full year is $155 million at the midpoint, above analyst estimates of $150.8 million
• Operating Margin: 3.5%, in line with the same quarter last year
• Market Capitalization: $908.9 million

StockStory’s Take

ScanSource’s third quarter results were met with a negative market reaction, as sales came in below Wall Street expectations and declined year over year. Management attributed the underperformance largely to continued weakness in Brazil and the effects of reporting more netted down revenue, particularly in the company’s Specialty Technology Solutions segment. CEO Mike Baur acknowledged that while some technology categories grew in North America, certain legacy areas remained in decline, tempering overall top-line momentum. Baur highlighted ongoing gross profit margin improvements and growth in recurring revenue, stating, “Each of our segments achieved year-over-year gross profit growth and higher EBITDA margins.”

Looking ahead, ScanSource’s management sees opportunities for profitable growth driven by acquisitions and a shift toward higher-margin, recurring revenue businesses. CEO Mike Baur explained that the company’s four business presidents are now directly responsible for pursuing both organic and inorganic opportunities in their markets, with a renewed emphasis on strategic M&A and channel programs for emerging tech suppliers. CFO Steve Jones cautioned that while the company is confident in its full-year outlook, the timing of large deals and the evolving mix between traditional and newer revenue streams could still introduce variability in quarterly performance. Management believes that investments in AI education, channel expansion, and acquisition integration will underpin future growth.

Key Insights from Management’s Remarks

Management pointed to several factors shaping Q3 performance, including segment-level weakness in Brazil, a favorable shift in gross profit mix, and the initial benefits from recent acquisitions.

• Brazil and currency headwinds: The company faced macroeconomic and foreign exchange pressures in Brazil, which reduced sales but had a limited impact on profitability due to matched local costs. CFO Steve Jones noted, “Brazil is less than 10% of our total revenues for the company,” emphasizing a focus on gross profit and working capital returns in the region.
• Gross profit mix improvement: Despite lower sales, gross profit margin rose as recurring revenue contributed a higher share—36% of consolidated gross profits for the quarter. Management credited this to increased contributions from recent acquisitions and more profitable vendor programs, helping offset lower traditional hardware sales.
• Acquisition strategy gains traction: The purchases of Advantix and ResourceTip have been accretive to both earnings and return on invested capital. CEO Mike Baur said these deals validated ScanSource’s approach to acquiring “higher margin opportunities in a working capital light model.”
• Growth in AI and advisory services: The Intelligence and Advisory segment, bolstered by ResourceTip, saw increased demand for AI-enabled customer experience (CX) solutions, with nine new suppliers added, many focused on AI. Management highlighted the AI master class and certifications as differentiators for the Intelisys channel.
• Channel tools enabling supplier growth: The Channel Exchange platform has facilitated onboarding smaller, innovative suppliers, especially those in AI and SaaS, by simplifying transaction processes and accelerating new partner contributions. Baur emphasized that Channel Exchange “knocks down one of those obstacles to signing new suppliers.”

Drivers of Future Performance

ScanSource’s outlook is shaped by expanding its acquisition pipeline, continued growth in recurring revenue streams, and strategic investments in emerging channel technologies.

• Acquisition-driven expansion: Management signaled that new acquisitions targeting high-margin, working capital-light businesses will be a priority, with four business presidents now empowered to pursue deals in their markets. CEO Mike Baur stated, “Our board felt like if we could continue to not only continue share repurchases, which we have indicated, but if we find more than one or two acquisitions over the next year, we want to do them.”
• Recurring revenue focus: The company is increasing its emphasis on advisory services, AI-enabled CX solutions, and integrated offerings like wireless connectivity, all of which support higher-margin recurring revenue. CFO Steve Jones cited that recurring revenue now represents over a third of gross profits, and this trend is expected to continue.
• Risk of large deal variability: Management acknowledged that the return of large hardware deals, while positive for top-line growth, can pressure gross profit margins due to their lower margin profile. Jones noted, “As the percentage of large deals increase, that will put some pressure on our gross profit margins,” but expects recurring revenue streams and acquired businesses to help balance this effect.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the pace and integration of new acquisitions in emerging, high-margin segments, (2) the continued growth in recurring revenue streams from advisory and AI-enabled services, and (3) stabilization or improvement in Brazil’s demand environment. Execution of the Integrated Solutions Group’s new business development initiatives and onboarding innovative suppliers will also be important markers for sustained profitability and growth.

ScanSource currently trades at $40.37, down from $41.83 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.