UPDATE 2-Premier Farnell shares fall on outlook concerns

Thu Dec 9, 2010 5:51am EST

* Q3 pretax profit 23.6 mln stg vs 13.9 mln stg

* Rev rises 26 pct to 251.3 mln stg

* Says Nov sales growth strong, but doesn't update outlook

* Shares fall 7 percent (Recasts; adds analyst, CEO comments, updates shares)

By Adveith Nair

BANGALORE, Dec 9 (Reuters) - Premier Farnell's (PFL.L) third-quarter profit jumped 70 percent on strong sales in developing markets, but shares in the British electronic components distributor fell 7 percent after it disappointed investors looking for an earnings upgrade.

Credit Suisse analysts said in a note that while the quarterly results were strong, this was the first time in a year that "a quarterly update won't lead to earnings upgrades."

Shares in the company, which counts Philips (PHG.AS), Microsoft (MSFT.O) and Nokia (NOK1V.HE) as its customers, were down 7.52 percent at 280.2 pence at 1046 GMT on Thursday -- among the biggest percentage losers on the London Stock Exchange.

Peel Hunt analyst Henry Carver said, "a lot of investors would have been waiting to see if the upgrades were significant, but they were not; so it was a good time to take profits."

The fall caps a 25 percent surge in Premier Farnell's shares since the company reported strong second-quarter results in September. The stock had outperformed both rival Electrocomponents Plc (ECM.L) and the FTSE 350 Support Services Index .FTNMX2790 during the period.

In an interview with Reuters, Chief Executive Harriet Green declined to give specific details on the fourth quarter, but said a greater-than-expected 16 percent sales growth in November was encouraging.

"We don't have huge visibility, but from the state of the supply chain, phenomenal inventories and the new customers we are adding, we are very positive about the closing two months of the year," Green said by phone.

Earlier in the day, the company said pretax profit rose to 23.6 million pounds ($37.3 million), while revenue was up 26 percent to 251.3 million pounds.

Sales in Greater China rose more than 80 percent. Sales in India and Eastern Europe grew 55 percent and 71 percent, respectively.

The solid results at Premier Farnell come a month after Electrocomponents reported a strong first half and forecast a bright full year. [ID:nLDE6AB06S]

Shares in the company, which sells items ranging from batteries to microchips, were also weighed down as Citigroup started coverage of the company with a "sell" rating.

"Based on historical trends, we are sceptical about Premier's claim to deliver 6-8 percent top-line growth on a sustained basis," Citigroup analysts said in a note.

"We view Premier as a structurally challenged distributor." ($1=.6321 Pound) (Reporting by Adveith Nair in Bangalore; Editing by Anne Pallivathuckal, Unnikrishnan Nair)

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