It's time for a financial update from a hometown hero. Tech equipment distributor Tech Data (NASDAQ:TECD), with its Clearwater, Fla., headquarters just down the road from where this Fool sits, kicks off its 2008 fiscal year reporting tomorrow morning.

What analysts say:

  • Buy, sell, or waffle? Fourteen Wall Street firms cover this company. Eleven of them recommend that you hold your position, and the other three say you should sell. In our Motley Fool CAPS investor community, Tech Data is a perennial one-star stock based on 19 user ratings.
  • Revenues. Management expects about $5.2 billion to $5.35 billion, but the average analyst wants just a tad more -- the consensus estimate is $5.36 billion, 8.3% above the $4.94 billion of year-ago sales.
  • Earnings. $0.39 per share would satisfy the average analyst, up from $0.32 per share a year ago.

What management says:
Slow and steady wins the race, if you ask Tech Data management. In the latest earnings report, CEO Bob Dutkowsky described the company's near future as "responsible growth in worldwide net sales and measured improvements in profitability." (Emphasis mine.)

What management does:
Easy does it when you're running as close to redline as Tech Data is. In fact, the trailing-twelve-month bottom line is red these days, because of a hefty $136 million charge for goodwill impairment in the summer of 2006.

Margins

10/2005

1/2006

4/2006

7/2006

10/2006

1/2007

Gross

4.94%

4.99%

4.89%

4.79%

4.69%

4.70%

Operating

1.02%

1.00%

0.95%

0.88%

0.82%

0.80%

Net

0.28%

0.13%

0.03%

-0.44%

-0.50%

-0.45%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I can't name too many other companies turning quarterly profits on less than 5% gross margins. There are direct competitors Ingram Micro (NYSE:IM) and SYNNEX (NYSE:SNX), and, um ... Hold on.

A quick Capital IQ screen reveals a handful of energy traders, pharma service providers McKesson (NYSE:MCK) and Amerisourcebergen (NYSE:ABC), and that's about it. Even Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) have gross margins too fat to fit in this screen.

This means that any change in operational efficiency has a major impact on the bottom line, and that flat-out massive revenue is imperative to decent results. It's a business model scaled to epic proportions, and the more epic the better. The careful approach described above is necessary to protect those fragile margins, so you can't expect any drastic moves from these guys.

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Dell is both a Motley Fool Inside Value pick and a Motley Fool Stock Advisor selection.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, and he's never visited Tech Data despite the close proximity. You can check out Anders' holdings if you like, and Foolish disclosure will help you find the road ahead.