WESCO Int'l (WCC) Misses Q1 EPS by 5c

WESCO Int'l (NYSE: WCC) reported Q1 EPS of $0.91, $0.05 worse than the analyst estimate of $0.96. Revenue for the quarter came in at $2 billion versus the consensus estimate of $1.99 billion.

First quarter highlights:

• Consolidated net sales of $2.0 billion, flat versus prior year
• Cost of goods sold as a percentage of net sales of 80.9%
  • Gross margin of 19.1%, up 50 basis points sequentially
• Operating profit of $60.9 million, including $4.9 million of merger-related expenses
• Earnings per diluted share of $0.82
• Diluted EPS of $0.91 adjusted for merger-related transaction costs
• Operating cash flow of $31.5 million
  • Free cash flow of $15.8 million, or 46% of net income
• Anixter transaction on track to close in Q2 or Q3
  • Substantial progress made in integration planning

Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "In these challenging times, we are committed to super-serving our customers while ensuring the integrity of their supply chains. All of our branches remain operational and we have taken the necessary steps to ensure the health and safety of our employees through implementing increased safety, sanitizing and social distancing protocols. Through the middle of March, our first quarter results were on track with our outlook. We had a strong start to the year with sales growth within our expected range and sequentially improving gross margins. In mid-March, the spread of the COVID-19 pandemic and government-imposed shutdowns impacted our customers and suppliers across all of our end markets. Through these difficult times, our top priority at WESCO is the health and safety of our employees and their families, our customers and supplier partners, our shareholders and the communities in which we operate. WESCO has been deemed an essential business and provides mission-critical electrical, industrial, utility and communications solutions that enable our customers to efficiently, effectively and safely operate their businesses. We have provided products to help maintain power to homes and essential businesses, connectors and cabling for broadband services to support virtual and remote work, and essential equipment for data center operations to meet the increased demand for bandwidth. We have also utilized our global scale and supply chain relationships to procure personal protective equipment for our customers and our employees. I would like to recognize and thank all of our WESCO associates for their inspirational dedication, commitment and hard work in managing through this crisis."

Mr. Engel continued, "Integration planning activities for the transformational combination of WESCO and Anixter are accelerating and we are more excited than ever about our opportunity to create the premier electrical and datacom distribution and supply chain services company. Our integration teams, comprising both WESCO and Anixter personnel, are working on numerous value creation initiatives for launch upon closing. We are highly confident in exceeding our three-year cost savings, sales growth and cash generation synergy targets communicated last month. We continue to be on track to close the transaction in the second or third quarter. With the challenging economic cycle we're facing near term, this strategic combination remains compelling as we're doubling the size of our company and will transform the new enterprise through execution of the integration plan and delivery of the synergies."

Mr. Engel concluded, "As we have in prior economic downturns, we are aggressively managing the business and have taken a series of cost reduction and cash management actions. We have successfully managed through every crisis we have faced over the last 25 years, and we will do so again. The duration of the current downturn and shape of the economic recovery remain uncertain, and as a result, we are withdrawing our prior guidance for the year. WESCO supports critical infrastructure needs and the essential businesses of our customers around the world, and benefits from the resiliency of our operating model and the counter-cyclical free cash flow generation of our business. We remain focused on what we can control — our strategy, our investments, our team, and our execution, and we are confident that we will emerge an even stronger company through this cycle, as we have in the past."

For earnings history and earnings-related data on WESCO Int'l (WCC) click here.

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