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WESCO (WCC) Q3 Earnings & Sales Beat Estimates, Rise Y/Y

WESCO's (WCC) third-quarter results reflect strong performance by three business units and contributions from portfolio expansion.

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This story originally appeared on Zacks

WESCO International, Inc. WCC reported third-quarter 2021 adjusted earnings of $2.74 per share, reflecting growth of 65% on a year-over-year basis. Also, the bottom line surpassed the Zacks Consensus Estimate by 7%.

- Zacks

The company reported quarterly net sales of $4.7 billion, up 14.2% year over year. Also, the figure beat the Zacks Consensus Estimate by 0.4%.

Top-line growth was primarily driven by a strong performance by three business units and contributions from portfolio expansion.

Top-Line Details

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

EES (42% of net sales): Sales in the segment were $1.98 billion for the third quarter, up 19.9% from the year-ago period’s level. This was driven by a solid momentum across the company’s construction, original equipment manufacturer and industrial businesses. Also, benefits from Anixter merger were other positives.

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

CSS (31% of net sales): Sales in the segment were $1.49 billion for the reported quarter, which increased 7.2% in the year-ago period. This was attributed to the well-performing security solutions and network infrastructure businesses and Anixter merger contributions.

UBS (27% of net sales): Sales in the segment were $1.26 billion for the reported quarter, up 14.4% from the year-ago period’s reading. This was driven by robust utility and broadband businesses. Also, the Anixter merger contributed well.

Operating Details

Gross margin was 21.3% for the reported quarter, which expanded 170 basis points (bps) from the year-ago period’s level.

Selling, general and administrative expenses were $721.8 million, up 28.4% from the year-ago quarter’s reading. As a percentage of net sales, the figure expanded 170 bps year over year to 15.3%.

WESCO’s adjusted operating margin was 5.9%, which expanded 110 bps from the prior-year quarter’s level.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash & cash equivalents were $251.8 million, down from $287.9 million as of Jun 30, 2021.

Long-term debt was $4.57 billion at the end of the third quarter compared with $4.30 billion in the prior quarter.

WESCO reported operating cash flow of $69.9 million in the third quarter. It used $17.7 million of cash in operations in the previous quarter.

The company generated $85 million of free cash flow in the reported quarter.

Guidance

For 2021, management expects sales growth of 11-13%. The previous guidance for the same was 10-13%. The Zacks Consensus Estimate for 2021 sales is pegged at $17.9 billion.

Adjusted EBITDA margins are now expected between 6.4% and 6.5%. The previous guidance for the same was 6.1-6.4%.

The company lifted its guidance for adjusted EPS from $8.40-$8.80 to $9.20-$9.40. The Zacks Consensus Estimate for earnings is pegged at $8.77 per share.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader technology sector include Advanced Micro Devices AMD, DXC Technology DXC and Mimecast Limited MIME, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Advanced Micro Devices, Mimecast and DXC are currently projected at 46.2%, 35% and 27.3%, respectively.



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