Conference Call Puts WESCO’s 1Q Earnings In Perspective

Conference Call Puts WESCO’s 1Q Earnings In Perspective

“We’re encouraged with our return to growth in Industrial after experiencing eight consecutive quarters of sales decline.”

That was one of the first statements made by WESCO Chairman, President and CEO John Engel to reporters during the company conference call on first quarter earnings.  As tED magazine has been reporting, the industrial sector has been a drag on the economy for years. Seeing the uptick is an encouraging sign.

“Our positive momentum in industrial is driven by 3 percent sales growth in the U.S. versus prior year and sequential sales growth with our oil and gas, metals and mining and OEM customers,” Engel added. “And I’m happy to report that our bidding activity levels have also increased to record levels, successive record levels in March and April, providing a positive set up for 2017.”

News of the industrial gains for WESCO comes as construction sales dipped in the first quarter.  That was not unexpected.  “Construction sales declined in the first quarter, driven by the U.S. which was down 6 percent,” Engel reported. “We’re seeing very good data activity levels. We’ve got some recent wins in healthcare, lighting, datacom, product security, education, infrastructure. As you kind of look across both the U.S. and Canadian landscape, we are beginning to see a better balance in terms of activity levels.”

With the improving economy comes the potential for price increases.  Engel told reporters he believes the pricing issues will be manageable. “On the supply side of our value chain, inflation wants to start to tick up… We’re aligned with our supply partners; we’d like to manage price increases through. But quite frankly, until customers see their demand pick up in a meaningful way, and I think we’re at the front end of that.”

Engel is also predicting a solid year in LED lighting, especially in the retrofit area. “Our overall lighting was flattish,” Engel said. “(In) LED we had very nice growth and our mix is consistent with our supplier partners. We have relationships with the world’s top lighting manufacturers. We have a terrific array of supplier relationships.

“They are now the foundation of lighting solutions and that price performance is improving, price and cost is coming down. And that’s opening up better ROI on upgrading and retrofitting and renovating the installed base. And any place where you are – when you look out the window and you look at all the structures that exist, what percentage is LED? It’s a very small percent. That’s the opportunity. So, we are still very bullish in the long term.”

As for the rest of the year, WESCO Senior Vice-President and CFO Dave Schulz believes it will be successful. “For the full year, we reaffirmed the expectations that we first provided in our 2017 outlook call on December 13. We expect sales to be flat to up 4 percent and operating margin in the range of 4.4 percent to 4.6 percent,” he said.


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