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WESCO (WCC) Q1 Earnings Beat Estimates, Sales Increase Y/Y

WESCO International, Inc. WCC reported first-quarter 2023 adjusted earnings of $3.75 per share, which reflected year-over-year growth of 3.3%. Also, the bottom line surpassed the Zacks Consensus Estimate by 3.9%.

Quarterly net sales of $5.5 billion rose 12% year over year and beat the Zacks Consensus Estimate of $5.42 billion.

The top-line growth was driven by a strong demand environment, solid execution of cross-sell program and improvement in supply-chain conditions. 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 (38% of net sales): Sales in the segment were $2.1 billion, up 2.2% from the year-ago period’s level. This was driven by solid momentum across WESCO’s strength across the industrial business was driven by growing momentum in automation, petrochem, and metals and mining. Further, growth in the non-residential construction business was a positive.

CSS (31% of net sales): Sales in the segment were $1.7 billion, up 20.8% from the year-ago period’s level. This was attributed to the well-performing security solution and network infrastructure business, as well as benefits from cross-selling and improvement in the supply chain. Further, the company’s top line was positively impacted by the acquisition of Rahi Systems.

UBS (31% of net sales): Sales in the segment were $1.7 billion, up 17.5% from the year-ago period’s number. This was driven by price inflation, secular trends in the utility business that are driving growth and expansion in the integrated supply business.

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 expanded 60 basis points (bps) from the year-ago period’s level to 21.9%.

Selling, general and administrative expenses were $817.7 million, up 13.9% from the year-ago quarter’s reading. As a percentage of net sales, the figure expanded 20 bps year over year to 14.8%.

The adjusted operating margin was 6.6%, which expanded 20 bps from the prior-year quarter’s reading.

Balance Sheet & Cash Flow

As of Mar 31, 2023, cash and cash equivalents were $349.1 million, down from $527.3 million as of Dec 31, 2022.

Long-term debt was $5.6 billion at first-quarter end compared with $5.3 billion in the prior quarter.

The company used $255.4 million of cash in operations against $422 million of cash generated from operations in the previous quarter.

For the first quarter, WESCO reported a negative free cash flow of $265.9 million.

Guidance

For 2023, management expects sales growth in the band of 6-9% on a reported basis. The Zacks Consensus Estimate for sales is pegged at $22.94 billion.

Adjusted EBITDA margin is anticipated between 8.1% and 8.4%.

Adjusted earnings per share are projected in the range of $16.80-$18.30. The Zacks Consensus Estimate for earnings is pegged at $17.54 per share.

Also, free cash flow is expected in the band of $600-$800 million.

Zacks Rank & Stocks to Consider

Currently, WESCO carries a Zacks Rank #2 (Buy).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Agilent Technologies A, DigitalOcean DOCN and Paycor HCM PYCR, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agilent Technologies is set to report second-quarter fiscal 2023 results on May 23. The Zacks Consensus Estimate for A’s earnings is pegged at $1.27 per share, implying growth of 12.4% from the year-ago quarter’s reported figure. A has lost 11.6% in the year-to-date period.

DigitalOcean is scheduled to release first-quarter 2023 results on May 9. The Zacks Consensus Estimate for DOCN’s earnings is pegged at 29 cents per share, suggesting a jump from 7 cents per share reported in the prior-year quarter. DOCN has gained 25.5% in the year-to-date period.

Paycor HCM is scheduled to report third-quarter fiscal 2023 results on May 10. The Zacks Consensus Estimate for PYCR’s earnings is pegged at 15 cents per share, suggesting an increase of 36.4% from the prior-year quarter’s reported figure. PYCR has gained 26% in the year-to-date period.

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