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WESCO (WCC) Q1 Earnings Miss Estimates, Sales Decline Y/Y

WESCO International WCC reported first-quarter 2023 adjusted earnings of $2.30 per share, down 38.7% year over year. Also, the bottom line lagged the Zacks Consensus Estimate by 6.5%.

Net sales of $5.35 billion fell 3.1% year over year. The figure beat the Zacks Consensus Estimate by 0.7%. Organic sales declined 3.2% year over year.

Top-Line Details

EES (39.2% of Net Sales): Sales in the segment were $2.09 billion, down 1.7% year over year. Organic sales declined 1.8% due to sluggish solar sales. Weak momentum among original equipment manufacturers (“OEM”) was a negative.

Nevertheless, the growing industrial business, owing to strength in automation, electrical equipment upgrades, and solid momentum in the oil and gas market, remained a plus.

CSS (31.3% of Net Sales): Sales in the segment were $1.67 billion, down 3.6% year over year. Organic sales dipped 3.7% year over year. Softness in the service provider market, which led to a decline in Enterprise Network Infrastructure, was concerning. The weak adoption of security solutions remained another negative.

Nevertheless, strong momentum in Wesco Data Center Solutions remained a plus.

UBS (29.5% of Net Sales): Sales in the segment were $1.58 billion, down 4.5% year over year. Organic sales dipped 4.6% year over year. Declining utility and broadband sales were concerning.

WESCO International, Inc. Price, Consensus and EPS Surprise

 

WESCO International, Inc. Price, Consensus and EPS Surprise
WESCO International, Inc. Price, Consensus and EPS Surprise

WESCO International, Inc. price-consensus-eps-surprise-chart | WESCO International, Inc. Quote

Operating Details

The gross margin contracted 60 basis points (bps) on a year-over-year basis to 21.3%.

Selling, general and administrative expenses were $829.4 million, up 1.4% year over year. As a percentage of net sales, the figure expanded 70 bps year over year to 14.6%.

The adjusted operating margin was 5.3%, which contracted 130 bps year over year.

Balance Sheet & Cash Flow

As of Mar 31, 2024, cash and cash equivalents were $984.1 million, up from $524.1 million as of Dec 31, 2023.

The long-term debt was $5.18 billion at the first-quarter end compared with $5.31 billion in the prior quarter.

The company generated $746.3 million in cash from operations compared with $69.3 million in the previous quarter.

For the first quarter, WESCO reported a free cash flow of $731.4 million.

Guidance

For 2024, the company revised guidance for sales growth downward from 1-4% to (2)-1%. Organic sales growth is expected to be flat to 3%. The Zacks Consensus Estimate for sales stands at $22.41 billion.

The adjusted EBITDA margin is expected between 7.5% and 7.9%.

The free cash flow is expected between $800 million and $1 billion.

Adjusted earnings are anticipated between $13.75 and $15.75 per share. The Zacks Consensus Estimate for the same is pegged at $14.14.

Zacks Rank & Stocks to Consider

WESCO has a Zacks Rank #5 (Strong Sell) at present.

Some better-ranked stocks in the broader technology sector are Arista Networks ANET, Applied Material AMAT and Dell Technologies DELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank  (Strong Buy) stocks here.

Arista Networks’ shares have gained 11.6% year to date. ANET is set to report its first-quarter 2024 results on May 7.

Applied Material’s shares have gained 22.4% year to date. AMAT is set to report second-quarter fiscal 2024 results on May 16.

Dell Technologies’ shares have surged 62.1% year to date. DELL is set to report its first-quarter fiscal 2025 results on May 30.

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