Why Is Wesco International (WCC) Up 14.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Wesco International (WCC). Shares have added about 14.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wesco International due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
WESCO Q4 Earnings Lag Estimates, Revenues Dip Y/Y
WESCO International reported fourth-quarter 2023 adjusted earnings of $2.65 per share, down 35.8% year over year. Also, the bottom line lagged the Zacks Consensus Estimate by 1.15%.
Net sales of $5.47 billion fell 1.5% year over year. The figure missed the Zacks Consensus Estimate by 1.66%. Organic sales declined 2.6% year over year.
Top-Line Details
EES (38.1% of Net Sales): Sales in the segment were $2.08 billion, down 3.9% year over year. Organic sales declined 4.1% due to declines in construction and original equipment manufacturers (“OEM”), partially offset by the continued positive momentum in the industrial business, price inflation and the benefits of cross-selling.
CSS (32.7% of Net Sales): Sales in the segment were $1.79 billion, up 1.6% year over year. Organic sales dipped 1.4% on a volume decline in security solutions.
UBS (29.2% of Net Sales): Sales in the segment were $1.60 billion, down 1.8% year over year.
Operating Details
The gross margin contracted 50 basis points (bps) on a year-over-year basis to 21.4%.
Selling, general and administrative expenses were $798.8 million, up 2.7% year over year. As a percentage of net sales, the figure increased 60 bps year over year to 14.6%.
The adjusted operating margin was 6%, which contracted 120 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash and cash equivalents were $524.1 million, up from $631.4 million as of Sep 30, 2023.
Long-term debt was $5.31 billion at the fourth-quarter end compared with $5.37 billion in the prior quarter.
The company generated $69.3 million in cash from operations compared with $361.7 million in the previous quarter.
For the fourth quarter, WESCO reported a free cash flow of $59.2 million.
Guidance
For 2024, WESCO expects an adjusted EBITDA margin between 7.5% and 7.9%, and an adjusted EBITDA of $1.75 billion at the mid-point.
The free cash flow is expected to be $700 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -24.83% due to these changes.
VGM Scores
At this time, Wesco International has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wesco International has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Wesco International belongs to the Zacks Electronics - Parts Distribution industry. Another stock from the same industry, Arrow Electronics (ARW), has gained 9.8% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Arrow Electronics reported revenues of $7.85 billion in the last reported quarter, representing a year-over-year change of -15.8%. EPS of $3.98 for the same period compares with $5.69 a year ago.
Arrow Electronics is expected to post earnings of $2.31 per share for the current quarter, representing a year-over-year change of -49.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
Arrow Electronics has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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