WESCO International, Inc. WCC reported second-quarter 2020 adjusted earnings of $1.04 per share, which reflects a 28.3% year-over-year decline. Also, the bottom line surpassed the Zacks Consensus Estimate of $0.66 per share.
The company reported quarterly net sales of $2.09 billion, down 2.9% year over year. However, the figure surpassed the Zacks Consensus Estimate by 6.7%.
The company’s organic sales for the reported quarter declined 12.3% from the prior-year period. However, its merger with Anixter positively impacted net sales by 10.3%.
Management stated that sales were negatively impacted by the COVID-19 pandemic.
The company’s sales in the United States were down 12% from the year-ago quarter. In Canada, sales were also down 17% year over year. The decrease was due to weakness in industrial and construction end markets, as projects were delayed starting in March as a result of the pandemic outbreak. Industrial sales were down in the United States and Canada during the second quarter.
Nevertheless, Utility sales remained strong in the quarter. Organically, sales from the United States and Canada were up 6% and 36%, respectively. It remains focused on strategic investments and margin expansion initiatives. Further, WESCO stays confident about product portfolio strength, value-added services and end-market momentum. These are likely to help the stock rebound in the near term.
Additionally, projects related to data center builds, security and cloud computing continue to provide sales growth opportunities.
During the quarter, the company completed the acquisition of Anixter International in a transaction valued at $4.5 billion. The deal will help it capitalize on the accelerating secular trends of electrification, increased bandwidth demand driven by higher voice, data, video and mobile usage, along with the digitization of the B2B value chain.
WESCO International, Inc. Price, Consensus and EPS Surprise
WESCO International, Inc. price-consensus-eps-surprise-chart | WESCO International, Inc. Quote
Gross margin was 18.9% for the reported quarter, which contracted 10 basis points (bps) from the year-ago period.
Adjusted selling, general and administrative expenses were $262.8 million, or 14.1% of net sales for the second quarter.
Legacy WESCO adjusted operating margin came in at 3.8%, contracting 80 bps from the prior-year quarter due to lower sales.
Balance Sheet & Cash Flow
At second quarter-end, cash & cash equivalents were $265.2 million, down from $342.6 million in the prior-year comparable period. Net long-term debt in second-quarter 2020 was $5.07 billion.
WESCO generated $101.2 million of cash from operations and $141.9 million in free cash flow in the reported quarter.
Zacks Rank & Key Picks
WESCO currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Dropbox DBX, Lam Research Corporation LRCX and Analog Devices ADI. While both Dropbox and Lam Research sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate of Dropbox, Lam Research, and Analog Devices is pegged at 34.4%, 15.4% and 13.3%, respectively.
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