PITTSBURGH - Wesco International (NYSE: NYSE:WCC), a prominent player in B2B distribution, logistics, and supply chain solutions, reported a decline in its fourth-quarter earnings and revenue, falling short of Wall Street expectations.
The company's adjusted earnings per share (EPS) for the quarter was $2.65, significantly below the analyst estimate of $3.86. Revenue also missed the mark, coming in at $5.47 billion against the consensus estimate of $5.59 billion.
The fourth quarter saw a 2% decrease in net sales compared to the same period last year, with organic sales dropping by 3%. Despite a full-year net sales increase of 5% and organic sales growth of 3%, the quarterly results did not meet the company's own expectations.
Wesco's stock reflected the disappointing quarter, plunging 10% as investors reacted to the news.
Chairman, President, and CEO John Engel attributed the quarterly underperformance to lower stock and flow sales and project delays, particularly in December. Engel noted that while some sectors like utility, data center, industrial, security, and network infrastructure continued to grow, others such as broadband and construction-related sectors did not perform as well.
Looking ahead, Wesco expects sales growth between 1% to 4% for 2024, with an adjusted EBITDA margin forecast of 7.5% to 7.9%. The midpoint of this guidance range falls short of the more optimistic analyst consensus. The company also anticipates generating substantial free cash flow in the range of $600 to $800 million.
Engel expressed confidence in the company's ability to outperform the market, citing long-term secular growth trends and Wesco's global capabilities. He also highlighted the company's ongoing digital transformation efforts and its commitment to returning capital to shareholders, including a planned 10% increase in the common stock dividend to $1.65 per year.
The fourth-quarter results were significantly impacted by lower supplier volume rebates and a shift in sales mix, which affected gross profit margins. SG&A expenses increased due to wage inflation and the acquisition of Rahi Systems, although this was partly offset by cost synergies and reduced incentive compensation expenses.
Engel concluded with a reflection on the successful integration of Anixter, which has transformed Wesco into a leader in several business segments and shifted its business towards higher growth and higher margin markets. He emphasized the company's performance since the acquisition, with sales up 30% and adjusted EBITDA up 89% compared to the standalone companies' 2019 performance.
Investors and market observers will be closely monitoring Wesco's performance in the coming quarters as the company navigates through the evolving economic landscape and strives to achieve its long-term financial goals.
InvestingPro Insights
Amidst the recent earnings report, Wesco International (NYSE: WCC) has shown some noteworthy dynamics that could influence investor perspectives. According to InvestingPro data, Wesco is trading at a P/E ratio of 12.52, which is considered high when juxtaposed with its near-term earnings growth, hinting at a premium valuation for its current earnings performance. The company's revenue growth over the last twelve months as of Q3 2023 stood at 8.48%, reflecting a steady upward trend in its top-line performance.
Despite the quarterly setback, Wesco's stock has demonstrated resilience over the longer term, with a strong return of 37.13% over the last three months. This is complemented by the fact that the company's liquid assets exceed short-term obligations, which may provide some comfort to investors concerned about financial stability. Furthermore, Wesco's stock is trading near its 52-week high, at 98.52% of this peak value, which could indicate market confidence in the company's future prospects.
For investors looking for more in-depth analysis, there are additional InvestingPro Tips available. These tips include insights such as analysts revising their earnings upwards for the upcoming period, and the recognition of Wesco as a prominent player in the Trading Companies & Distributors industry. For those interested in a more comprehensive investment strategy, there are 11 tips in total available on InvestingPro. To access these insights and enhance your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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