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WESCO (WCC) Issues '18 Outlook, Announces Share Repurchase

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WESCO International, Inc. (WCC - Free Report) gave an impressive view for 2018. This indicates that the company is benefiting from strength across all end markets and geographic regions.  

Moreover, its board of directors authorized a share buyback program, which replaces the similar program ending this year. WESCO will repurchase up to $300 million worth of shares over the next three years.

It reiterated its 2017 guidance. The company continues to expect 2017 sales growth of 3% to 4%, earnings per share in the range of $3.75 to $3.95, and free cash flow generation of at least 90% of net income.

Notably, shares of WESCO have lost 4.2% year to date, slightly better than the industry’s loss of 4.7%.



Guidance for 2018

WESCO foresees favorable market conditions and growth in its end markets in 2018. The company expects sales growth in the range of 3% to 6%, earnings per share in the range of $4.05 to $4.55, and free cash flow generation of at least 90% of net income in 2018.

Operating margin is expected between 4.2% and 4.6%, an improvement of 30 to 50 basis points (bps). Tight discretionary cost controls are also expected to support the outlook.

In addition, WESCO might also benefit from U.S. tax reform proposals, which are currently under consideration. However, the guidance assumes no such impact.

Reasons for the Positive Outlook

Sales to the Utilities market have been improving. Increased investment in upgrade and maintenance of existing infrastructure, as well as the construction of new, contemporary and more automated power plants is a driving factor. Its financial strength, integrated supply capabilities and product range make it an attractive choice for customers.

WESCO’s continuous investment in One WESCO initiative to create extensive supply chain management solutions, by integrating its portfolio of products and services and its supplier relationships, has improved the company’s service capabilities over time and has created considerable synergies across business platforms. One WESCO has managed significant customer wins and is expected to add customers, which in turn will drive revenues.

The company is also expanding in new verticals such as retail, manufacturing, education and healthcare, both in the domestic market and abroad. All these factors are expected to drive its top line.

Share Repurchase Program

WESCO’s share buyback program demonstrates the company’s confidence in its long-term growth outlook and ability to generate strong and consistent free cash flow.

Repurchasing shares will enable WESCO to offset the dilution of EPS and to make opportunistic purchases to support growth.

Zacks Rank & Stocks to Consider

WESCO has a Zacks Rank #2 (Buy).

Intel Corporation (INTC - Free Report) , IPG Photonics Corporation (IPGP - Free Report) and NVIDIA Corporation (NVDA - Free Report) are some of the better-ranked stocks in the broader technology sector. All of them sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Intel, IPG Photonics and NVIDIA is currently projected to be 8.4%, 19.7% and 10.3%, respectively.

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