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WESCO International (WCC - Free Report) reported third-quarter 2023 adjusted earnings of $4.49 per share, which remained consistent with the earnings of $4.49 per share from the same period in the previous year. Also, the bottom line beat the Zacks Consensus Estimate by 16.62%.
Net sales of $5.65 billion rose 3.6% year over year. The figure beat the Zacks Consensus Estimate of $5.64 billion.
A strong demand environment, improvement in supply-chain conditions and the ongoing wave of digital transformation drove the top-line growth.
Strong momentum across the Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS) segments contributed well.
WESCO International, Inc. Price, Consensus and EPS Surprise
EES (38.8% of net sales): Sales in the segment were $2.1 billion, down 2% from the year-ago period’s level. This was due to the softness in the construction business. The OEM business declined due to persistent weakness in manufactured structures.
CSS (31.5% of net sales): Sales in the segment were $1.77 billion, up 11% from the year-ago period’s level. This was attributed to the well-performing security solution and network infrastructure business, as well as the strong demand for professional audiovisual and in-building wireless applications. Further, the Rahi acquisition contributed positively to the top-line growth within the segment. The upside can be attributed to strong demand from global hyperscale data center customers.
UBS (29.7% of net sales): Sales in the segment were $1.67 billion, up 4.2% from the year-ago period’s number. The upside was driven by strong momentum in utility sales driven by investments in electrification, green energy and grid modernization. Strong growth in the integrated supply business was a plus.
Operating Details
The gross margin contracted 50 basis points (bps) from the year-ago period’s level to 21.6%.
Selling, general and administrative expenses were $796.4 million, up 4.8% from the year-ago quarter’s reading. As a percentage of net sales, the figure expanded 20 bps year over year to 14.1%.
The adjusted operating margin was 7.1%, which contracted 50 basis points (bps) from the prior-year quarter’s reading.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash and cash equivalents were $631.4 million, up from $ 529 million as of Jun 30, 2023.
Long-term debt was $5.37 billion at the third-quarter end compared with $5.52 billion in the prior quarter.
The company generated $361.7 million of cash from operations against $317.6 million of cash used in operations in the previous quarter.
For the third quarter, WESCO reported a free cash flow of $357.1 million.
Guidance
For 2023, management lowered its expectation for sales growth from 5-7% on a reported basis due to market weakness in the EES segment. The Zacks Consensus Estimate for sales is pegged at $22.65 billion.
Adjusted EBITDA margin is anticipated between 7.8% and 8%.
The company also revised its guidance for adjusted earnings per share downward from $15.60-$16.10. The Zacks Consensus Estimate for earnings is pegged at $15.32 per share.
Also, free cash flow is expected in the band of $500-$700 million.
Image: Bigstock
WESCO (WCC) Q3 Earnings Beat Estimates, Revenues Rise Y/Y
WESCO International (WCC - Free Report) reported third-quarter 2023 adjusted earnings of $4.49 per share, which remained consistent with the earnings of $4.49 per share from the same period in the previous year. Also, the bottom line beat the Zacks Consensus Estimate by 16.62%.
Net sales of $5.65 billion rose 3.6% year over year. The figure beat the Zacks Consensus Estimate of $5.64 billion.
A strong demand environment, improvement in supply-chain conditions and the ongoing wave of digital transformation drove the top-line growth.
Strong momentum across the Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS) segments contributed well.
WESCO International, Inc. Price, Consensus and EPS Surprise
WESCO International, Inc. price-consensus-eps-surprise-chart | WESCO International, Inc. Quote
The backlog has normalized, down 6% YoY and about 7% sequentially from June, as improved supply chain lead times continue to affect it.
However, the company witnessed softness in the Electrical & Electronic Solutions (EES) unit.
WESCO has returned 8.6% on a year-to-date basis compared with the Electronics-Parts Distribution’s growth of 8.6%.
Top-Line Details
EES (38.8% of net sales): Sales in the segment were $2.1 billion, down 2% from the year-ago period’s level. This was due to the softness in the construction business. The OEM business declined due to persistent weakness in manufactured structures.
CSS (31.5% of net sales): Sales in the segment were $1.77 billion, up 11% from the year-ago period’s level. This was attributed to the well-performing security solution and network infrastructure business, as well as the strong demand for professional audiovisual and in-building wireless applications. Further, the Rahi acquisition contributed positively to the top-line growth within the segment. The upside can be attributed to strong demand from global hyperscale data center customers.
UBS (29.7% of net sales): Sales in the segment were $1.67 billion, up 4.2% from the year-ago period’s number. The upside was driven by strong momentum in utility sales driven by investments in electrification, green energy and grid modernization. Strong growth in the integrated supply business was a plus.
Operating Details
The gross margin contracted 50 basis points (bps) from the year-ago period’s level to 21.6%.
Selling, general and administrative expenses were $796.4 million, up 4.8% from the year-ago quarter’s reading. As a percentage of net sales, the figure expanded 20 bps year over year to 14.1%.
The adjusted operating margin was 7.1%, which contracted 50 basis points (bps) from the prior-year quarter’s reading.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash and cash equivalents were $631.4 million, up from $ 529 million as of Jun 30, 2023.
Long-term debt was $5.37 billion at the third-quarter end compared with $5.52 billion in the prior quarter.
The company generated $361.7 million of cash from operations against $317.6 million of cash used in operations in the previous quarter.
For the third quarter, WESCO reported a free cash flow of $357.1 million.
Guidance
For 2023, management lowered its expectation for sales growth from 5-7% on a reported basis due to market weakness in the EES segment. The Zacks Consensus Estimate for sales is pegged at $22.65 billion.
Adjusted EBITDA margin is anticipated between 7.8% and 8%.
The company also revised its guidance for adjusted earnings per share downward from $15.60-$16.10. The Zacks Consensus Estimate for earnings is pegged at $15.32 per share.
Also, free cash flow is expected in the band of $500-$700 million.
Zacks Rank & Other Stocks to Consider
Wesco International has a Zacks Rank #3 (Hold).
Ballard Power System (BLDP - Free Report) , NetEase (NTES - Free Report) and Upstart (UPST - Free Report) are some other top-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. While NTES sports a Zacks Rank #1 (Strong Buy), BLDP and UPST carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ballard Power System shares have declined 26.3% year to date. BLDP is set to report its third-quarter 2023 results on Nov 7.
NetEase shares have gained 51.1% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.
Upstart shares have returned 107.5% year to date. UPST is set to report its third-quarter 2023 results on Nov 7.