WESCO (WCC) Q2 Earnings & Sales Beat Estimates, Rise Y/Y

WESCO International, Inc. WCC reported second-quarter 2022 adjusted earnings of $4.19 per share, reflecting year-over-year growth of 59%. Also, the bottom line surpassed the Zacks Consensus Estimate by 7.9%.

The company reported quarterly net sales of $5.48 billion, up 19% year over year. Also, the figure beat the Zacks Consensus Estimate of $5.36 billion.

Top-line growth was driven by strong momentum across all three business units of the company.

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

Top-Line Details

The company operates under three business units — Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility & Broadband Solutions (UBS).

EES (41.8% of net sales): Sales in the segment were $2.3 billion for the second quarter, up 21.2% from the year-ago period. This was driven by a solid momentum across the company’s construction, original equipment manufacturer and industrial businesses. Benefits from the Anixter merger were other positives.

CSS (31.8% of net sales): Sales in the segment were $1.6 billion for the reported quarter, which rose 9.6% from the year-ago period. This was attributed to the well-performing security solutions and network infrastructure businesses.

UBS (26.4% of net sales): Sales in the segment were $1.6 billion for the reported quarter, up 28% from the year-ago period. This was driven by expanding integrated supply business, solid connectivity demand and benefits from investments in grid modernization.

Operating Details

The gross margin was 21.7% for the reported quarter, which expanded 70 basis points (bps) from the year-ago period.

Selling, general and administrative expenses were $772.9 million, up 10.5% from the year-ago quarter’s reading. As a percentage of net sales, the figure contracted 110 bps year over year to 14.1%.

WESCO’s adjusted operating margin was 7.1%, which expanded 140 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash and cash equivalents were $236.8 million, up from $201.5 million as of Mar 31, 2022.

Long-term debt was $5.04 billion at the second-quarter end compared with $4.8 billion in the prior quarter.

WESCO used $132.6 million of cash in operations in the second quarter compared with $171.9 million in the previous quarter.

For the second quarter, WESCO reported a negative free cash flow of $128.6 million.

Guidance

For 2022, management raised its guidance for sales growth from 12-15% to 16-18%. The Zacks Consensus Estimate for 2022 sales is pegged at $20.9 billion.

The company also raised the guidance for adjusted EBITDA margin from 7.3-7.6% to 7.8-8%.

WESCO hiked its guidance for adjusted EPS from $14.00-$15.00 to $15.60-$16.40, indicating 55-65% growth from the year-ago reported figure. The Zacks Consensus Estimate for earnings is pegged at $14.79 per share.

Zacks Rank & Stocks to Consider

Currently, WESCO has a Zacks Rank #3 (Hold).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Keysight Technologies KEYS, ASE Technology ASX and Asure Software ASUR, 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.

Keysight Technologies has lost 19.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

ASE technology has lost 24.6% in the year-to-date period. The long-term earnings growth rate for ASX is currently projected at 23.1%.

Asure Software has lost 32.3% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.

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