WESCO Q1 Earnings Miss Estimates, Sales Slip Y/Y, Stock Rises

WESCO International WCC reported first-quarter 2025 adjusted earnings of $2.21 per share, down 3.9% year over year. The bottom line missed the Zacks Consensus Estimate by 0.90%.

Net sales were $5.34 billion, down 0.1% year over year due to continued weakness in the utility business. However, the figure beat the Zacks Consensus Estimate by 2.10%. Organic sales increased 5.6% year over year.

Following the release, WCC shares rose 0.97% in the pre-market trading as investors responded positively to robust organic growth, and strong contributions from the data center and CSS segments.

WESCO International, Inc. Price, Consensus and EPS Surprise

 

WESCO International, Inc. price-consensus-eps-surprise-chart | WESCO International, Inc. Quote

WCC has a mixed earnings surprise history. The company’s earnings beat the Zacks Consensus Estimate in one of the trailing four quarters and missed in the remaining three, the average negative surprise being 1.24%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

WCC’s Q1 Top-Line Details

The EES Segment (38.6% of Net Sales): Sales in the segment were $2.07 billion, flat year over year due to foreign exchange headwinds and one less workday. However, organic sales rose 3.4% year over year, driven by growth in OEM.

CSS (37.4% of Net Sales): Sales in the segment were $2 billion, up 17.3% year over year. Organic sales increased 18.1% on a year-over-year basis. The rise was driven by robust performance in Wesco Data Center Solutions, which surged more than 65%, fueled by particularly strong demand from hyperscale data center customers.

UBS (23.9% of Net Sales): Sales in the segment were $1.28 billion, down 19.2% year over year. Organic sales declined 4.9% year over year. The overall weakness was primarily led by continued softness in the utility business, which declined in the high-single digits due to ongoing customer destocking. This was partially offset by strong growth in broadband demand.

WCC Struggles With Margin Contraction

The first-quarter 2025 gross margin was 21.1%, marking a year-over-year contraction of 20 basis points (bps). The slight contraction was primarily driven by lower gross margins in the CSS and EES segments, partially offset by the positive impacts of the WIS business divestiture.

The adjusted EBITDA margin of 5.8% declined 50 bps year over year.

Selling, general and administrative expenses were $829 million, up 2.3% year over year. As a percentage of net sales, the figure increased 40 bps year over year to 15.5%.

The adjusted operating margin was 4.6%, which contracted 60 bps year over year.

Balance Sheet & Cash Flow

As of March 31, 2025, cash and cash equivalents were $681.6 million, down from $702.6 million as of Dec. 31, 2024.

The long-term debt was $5.14 billion at the first-quarter end compared with $5.05 billion in the prior quarter.

The company generated $28 million in cash from operations in the reported quarter compared with $276.6 million in the previous quarter.

For the first quarter, WESCO reported a free cash flow of $9.4 million compared with the previous quarter’s $268.4 million.

WESCO Affirms 2025 Financial Targets

The company is maintaining its 2025 outlook, supported by strong early-year momentum. Despite heightened uncertainty and market volatility, WESCO remains focused on controllable factors, such as accelerating cross-selling initiatives, executing its enterprise-wide margin improvement program, and driving operational efficiencies through its tech-enabled business transformation.

For 2025, WCC expects organic sales growth between 2.5% and 6.5%. Sales on a reported basis are expected to be $21.8-$22.7 billion.

WESCO projects the adjusted EBITDA margin between 6.7% and 7.2%.

The adjusted diluted EPS is anticipated between $12 and $14.50 per share.

The free cash flow is expected between $600 and $800 million.

Zacks Rank & Stocks to Consider

WESCO carries a Zacks Rank #3 (Hold) at present.

NCR Atleos Corporation NATL, Synchronoss Technologies SNCR and Qualys QLYS are some better-ranked stocks in the broader Zacks Computer and Technology sector.

NCR Atleos sports a Zacks Rank #1 (Strong Buy) at present, and Synchronoss Technologies and Qualys carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

NCR Atleos is set to report first-quarter 2025 results on May 7, whereas Synchronoss Technologies and Qualys are scheduled to report first-quarter 2025 results on May 6.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research