Why Wesco International Stock Just Crashed 23%


Shares of electrical equipment supplier Wesco International (NYSE: WCC) tumbled 23% through 11:40 a.m. ET on Tuesday after the company reported big misses on both sales and earnings this morning.

Heading into earnings day, analysts had forecast that Wesco would report an adjusted profit of $3.87 per share on sales of $5.6 billion. Instead, Wesco reported only $5.5 billion in sales and a profit of just $2.65 per share, adjusted for one-time items.

Wesco International sales and earnings

Sales for the fourth quarter of 2023 declined 2%, a disappointing end to a year in which full-year sales rose 4.5%. Earnings as calculated according to generally accepted accounting principles (GAAP) were a bit worse than the adjusted number shown above. GAAP earnings declined 37% year over year to just $2.45 per share.

On the plus side, as already noted, sales for the year did grow 4.5%. However, the steep decline in Q4 profits took its toll on full-year earnings results as well. For all of 2023, Wesco reported a profit of $13.54 per share, down 12% from the $15.33 per share earned last year.

Is Wesco stock a sell?

So Wesco had a bad quarter. Does this make the stock a sell?

Not necessarily. For one thing, CEO John Engel says the company is still riding “long-term secular growth trends” in its end markets, which include utilities, data centers, security, network infrastructure, and industrial markets. For this reason, management thinks sales will resume growing in 2024 — up 1% to 4%. Free cash flow (FCF), meanwhile, will go from strength to strength. Wesco generated more than $400 million in FCF in 2023. In 2024, the company predicts positive cash profits of anywhere from $600 million to $800 million this year.

Taken at the midpoint, that means Wesco stock is selling for less than 11 times current year free cash flow — free cash flow that is expected to grow 75% this year. Granted, long-term growth forecasts for the company are much lower than that — just 10% annually over the next five years. But to me at least, 11x FCF for a company growing even just 10%, and paying a 0.8% dividend, seems a very fair price to pay.

Should you invest $1,000 in Wesco International right now?

Before you buy stock in Wesco International, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Wesco International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wesco International. The Motley Fool has a disclosure policy.

Why Wesco International Stock Just Crashed 23% was originally published by The Motley Fool

Source link

About The Author

Scroll to Top