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Earnings Miss: WESCO International, Inc. Missed EPS By 13% And Analysts Are Revising Their Forecasts

Simply Wall St
·4 mins read

Investors in WESCO International, Inc. (NYSE:WCC) had a good week, as its shares rose 7.9% to close at US$26.95 following the release of its quarterly results. Revenues were in line with forecasts, at US$2.0b, although statutory earnings per share came in 13% below what the analysts expected, at US$0.82 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on WESCO International after the latest results.

See our latest analysis for WESCO International

NYSE:WCC Past and Future Earnings May 4th 2020
NYSE:WCC Past and Future Earnings May 4th 2020

Taking into account the latest results, the eleven analysts covering WESCO International provided consensus estimates of US$7.65b revenue in 2020, which would reflect a not inconsiderable 8.6% decline on its sales over the past 12 months. Statutory earnings per share are forecast to nosedive 31% to US$3.50 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$7.59b and earnings per share (EPS) of US$3.72 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

The average price target fell 6.8% to US$43.64, with reduced earnings forecasts clearly tied to a lower valuation estimate. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values WESCO International at US$87.00 per share, while the most bearish prices it at US$27.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the WESCO International's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 8.6% revenue decline a notable change from historical growth of 2.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - WESCO International is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for WESCO International. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that WESCO International's revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for WESCO International going out to 2024, and you can see them free on our platform here.

You still need to take note of risks, for example - WESCO International has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.