Company Reports

Wesco reported second-quarter organic sales growth of 13% year over year driven by around 45% growth in data center equipment sales. Management raised full-year guidance, and shares traded up over 10% the morning of July 30.

Since its initial public offering in 1999, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, commercial, and utility markets. It competes in highly fragmented distribution markets, but the firm's large scale, global footprint, expansive supplier base, and broad service offering differentiate it from smaller local and regional competitors.

Wesco reported first-quarter organic sales growth of 12.3% year over year, driven by nearly 70% growth in its data center sales. Management raised full-year sales growth guidance, and shares traded up around 15% the afternoon of April 30.

Wesco reported fourth-quarter organic sales growth of 9% year over year. Over the full year, organic sales grew nearly 9% driven by strength in its data center solutions division.

Wesco increased its organic sales by over 12%, but with 80 basis points of gross margin contraction, adjusted earnings per share compounded 9.5% year over year. Results were driven by strength in its data center solutions division.

Since its initial public offering in 1999, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, commercial, and utility markets. It competes in highly fragmented distribution markets, but the firm's large scale, global footprint, expansive supplier base, and broad service offering differentiate it from smaller local and regional competitors.

Wesco reported 7.2% organic sales growth and slight operating margin compression, resulting in approximately 5.6% growth in adjusted earnings per share. Management raised its full-year sales guidance, but shares traded down over 3% the morning of July 31.

Since its initial public offering in 1999, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, commercial, and utility markets. It competes in highly fragmented distribution markets, but the company’s large scale, global footprint, expansive supplier base, and broad service offering differentiate it from smaller local and regional competitors.

Wesco reported 5.6% organic sales growth, masked by the sale of Wesco Integrated Supply. Higher operating expenses amounted to 40 basis points of EBIT margin contraction. Management kept its full-year guidance, but shares traded down over 5% the morning of May 1.

After taking a fresh look at Wesco, we’ve increased our fair value estimate to $216 per share, up from $215 to reflect the time value of money. We maintain Wesco’s narrow economic moat rating through which we believe it can produce returns above its cost of capital over the next decade. We also maintain Wesco’s Standard Capital Allocation Rating, reflecting its satisfactory balance sheet, sound investment decisions, and reasonable shareholder distributions.

Since its initial public offering in 1999, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, commercial, and utility markets. It competes in highly fragmented distribution markets, but the company’s large scale, global footprint, expansive supplier base, and broad service offering differentiate it from smaller local and regional competitors.

In 1994, Westinghouse Electrical sold its electrical distribution business, Westinghouse Electric Supply, or Wesco, to a private equity firm. Wesco went public in 1999. Since its separation from Westinghouse, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, utility, commercial, institutional, and government markets.

After four consecutive quarters of year-over-year revenue declines, Wesco returned to growth during the fourth quarter with organic revenue up 2%. Adjusted EBITDA margin narrowed 30 basis points to 6.7%, but adjusted EPS increased 19% to $3.16.

Shares of Wesco surged on Oct. 31 after the firm's third-quarter revenue and adjusted EPS topped FactSet consensus estimates. Still, some of Wesco's end markets remain challenged, and third-quarter organic revenue fell about 1% year over year while adjusted EPS declined 20% to $3.58.

In 1994, Westinghouse Electrical sold its electrical distribution business, Westinghouse Electric Supply, or Wesco, to a private equity firm. Wesco went public in 1999. Since its separation from Westinghouse, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, utility, commercial, institutional, and government markets.

Shares of Wesco sold off sharply on Aug. 1 after the narrow-moat-rated industrial distributor reported second-quarter revenue and adjusted EPS that fell short of FactSet consensus estimates. Furthermore, management lowered full-year revenue, adjusted EBITDA margin, and adjusted EPS guidance as US utility and broadband market demand remains soft amid inventory destocking and project delays. Management is still targeting $0.8 billion-$1.0 billion of free cash flow in 2024, unchanged from prior guidance. Over the longer term, we still think Wesco’s utility and broadband solutions segment can deliver mid-single-digit growth, and we’re optimistic growth will return next year. With no change to management’s 2024 free cash flow guidance and our long-term outlook intact, we’ve maintained our $197 per share fair value estimate.

In 1994, Westinghouse Electrical sold its electrical distribution business, Westinghouse Electric Supply, or Wesco, to a private equity firm. Wesco went public in 1999. Since its separation from Westinghouse, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, utility, commercial, institutional, and government markets.

The market reacted positively to Wesco’s first-quarter earnings. Shares were up nearly 7% in trading on May 2. We now think Wesco’s shares are 15% undervalued.

In 1994, Westinghouse Electrical sold its electrical distribution business, Westinghouse Electric Supply, or Wesco, to a private equity firm. Wesco went public in 1999. Since its separation from Westinghouse, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, utility, commercial, institutional, and government markets.

In 1994, Westinghouse Electrical sold its electrical distribution business, Westinghouse Electric Supply, or Wesco, to a private equity firm. Wesco went public in 1999. Since its separation from Westinghouse, Wesco has used most of its cumulative free cash flow on acquisitions, which have expanded its scale, diversified revenue, and fueled a meaningful portion of the company’s growth. Once squarely focused on construction end markets, Wesco now serves a much broader array of customers across industrial, construction, utility, commercial, institutional, and government markets.