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Wesco International (WCC) Down 16% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Wesco International (WCC - Free Report) . Shares have lost about 16% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wesco International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
WESCO's Q4 Earnings Beat Estimates
WESCO International reported fourth-quarter 2022 adjusted earnings of $4.13 per share, reflecting year-over-year growth of 30%. Also, the bottom line surpassed the Zacks Consensus Estimate by 8.4%.
Quarterly net sales of $5.56 billion rose 14.6% year over year and beat the Zacks Consensus Estimate of $5.37 billion.
The top-line growth was driven by strong demand environment, solid execution of cross-sell program and improving supply-chain condition. Further, strong performance across all business units contributed well.
Top-Line Details
WESCO operates under three business units, namely Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS).
EES (39% of net sales): Sales in the segment were $2.2 billion, up 8.7% from the year-ago period’s level. This was driven by solid momentum across WESCO’s non-residential construction business, owing to rising investments in electrification and renewables. Further, strength across industrial business and original equipment manufacturers driven by growing momentum among automation, petrochem, and metals and mining, was a positive.
CSS (32% of net sales): Sales in the segment were $1.8 billion, up 16.4% from the year-ago period’s level. This was attributed to the well-performing network infrastructure business and strong momentum among multinational customers for professional A/V projects and in-building wireless applications.
UBS (29% of net sales): Sales in the segment were $1.6 billion, up 21.2% from the year-ago period’s number. This was driven by solid connectivity demand and rural broadband expansion, resulting in growth in the broadband communication business. Further, growing investments in electrification, green energy and grid modernization contributed well.
Operating Details
The gross margin expanded 110 basis points (bps) from the year-ago period’s level to 21.9%.
Selling, general and administrative expenses were $793.1 million, up 8.1% from the year-ago quarter’s reading. As a percentage of net sales, the figure contracted 80 bps year over year to 14.1%.
Adjusted operating margin was 7.1%, which expanded 150 bps from the prior-year quarter’s reading.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents were $527.4 million, up from $234.1 million as of Sep 30, 2022.
Long-term debt was $5.3 billion at the fourth-quarter end compared with $5.2 billion in the prior quarter.
The company generated $422 million of cash from operations against $106.1 million of cash used in operations in the previous quarter.
For the fourth quarter, WESCO reported a free cash flow of $399 million.
Guidance
For 2023, management expects sales growth in the band of 6-9% on a reported basis.
Adjusted EBITDA margin is anticipated between 8.1% and 8.4%.
Adjusted earnings per share is projected in the range of $16.80-$18.30.
Also, free cash flow is expected in the band of $600-$800 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 8.49% due to these changes.
VGM Scores
At this time, Wesco International has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Wesco International has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Wesco International (WCC) Down 16% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Wesco International (WCC - Free Report) . Shares have lost about 16% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wesco International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
WESCO's Q4 Earnings Beat Estimates
WESCO International reported fourth-quarter 2022 adjusted earnings of $4.13 per share, reflecting year-over-year growth of 30%. Also, the bottom line surpassed the Zacks Consensus Estimate by 8.4%.
Quarterly net sales of $5.56 billion rose 14.6% year over year and beat the Zacks Consensus Estimate of $5.37 billion.
The top-line growth was driven by strong demand environment, solid execution of cross-sell program and improving supply-chain condition. Further, strong performance across all business units contributed well.
Top-Line Details
WESCO operates under three business units, namely Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS).
EES (39% of net sales): Sales in the segment were $2.2 billion, up 8.7% from the year-ago period’s level. This was driven by solid momentum across WESCO’s non-residential construction business, owing to rising investments in electrification and renewables. Further, strength across industrial business and original equipment manufacturers driven by growing momentum among automation, petrochem, and metals and mining, was a positive.
CSS (32% of net sales): Sales in the segment were $1.8 billion, up 16.4% from the year-ago period’s level. This was attributed to the well-performing network infrastructure business and strong momentum among multinational customers for professional A/V projects and in-building wireless applications.
UBS (29% of net sales): Sales in the segment were $1.6 billion, up 21.2% from the year-ago period’s number. This was driven by solid connectivity demand and rural broadband expansion, resulting in growth in the broadband communication business. Further, growing investments in electrification, green energy and grid modernization contributed well.
Operating Details
The gross margin expanded 110 basis points (bps) from the year-ago period’s level to 21.9%.
Selling, general and administrative expenses were $793.1 million, up 8.1% from the year-ago quarter’s reading. As a percentage of net sales, the figure contracted 80 bps year over year to 14.1%.
Adjusted operating margin was 7.1%, which expanded 150 bps from the prior-year quarter’s reading.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents were $527.4 million, up from $234.1 million as of Sep 30, 2022.
Long-term debt was $5.3 billion at the fourth-quarter end compared with $5.2 billion in the prior quarter.
The company generated $422 million of cash from operations against $106.1 million of cash used in operations in the previous quarter.
For the fourth quarter, WESCO reported a free cash flow of $399 million.
Guidance
For 2023, management expects sales growth in the band of 6-9% on a reported basis.
Adjusted EBITDA margin is anticipated between 8.1% and 8.4%.
Adjusted earnings per share is projected in the range of $16.80-$18.30.
Also, free cash flow is expected in the band of $600-$800 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 8.49% due to these changes.
VGM Scores
At this time, Wesco International has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Wesco International has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.