Wesco 1Q Earnings Beat Expectations, But Lower Than Last Year

PITTSBURGH (AP)—Wesco International Inc. (WCC) on Thursday reported first-quarter net income of $36 million.

The Pittsburgh-based company said it had profit of 77 cents per share.

The results topped Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of 73 cents per share.

The maker of electrical and industrial maintenance supplies and construction materials posted revenue of $1.78 billion in the period, also topping Street forecasts. Five analysts surveyed by Zacks expected $1.75 billion.

Wesco International expects full-year earnings to be $3.75 to $4.20 per share.

Wesco International shares have increased 34 percent since the beginning of the year.

The Wesco reported earnings for first quarter that lost ground from last year.

The company earnings of $36.0 million, or $0.77 per share is down from $47.0 million, or $0.90 per share, in the first quarter of 2015.

Wesco’s official news release:

PITTSBURGH, April 28, 2016 /PRNewswire/ — WESCO International, Inc. (NYSE: WCC), a leading provider of electrical, industrial, and communications MRO and OEM products, construction materials, and advanced supply chain management and logistics services, announces its results for the first quarter of 2016.

Mr. John J. Engel, WESCO’s Chairman, President and CEO, commented, “In line with our expectations, our first quarter sales declined 2%, reflecting continued weakness in commodity-driven end markets and foreign exchange headwinds. Organic sales were down 7%, with the U.S. and Canada down 6% and 11%, respectively. While the top line remains pressured overall, the benefits of ongoing cost reduction and organizational streamlining actions partially mitigated the impact of lower sales on earnings per share. Free cash flow remained strong and exceeded 200% of net income, allowing us to maintain our leverage ratio at 3.8 times EBITDA, in line with our expectations following the completion of our acquisition of Atlanta Electrical Distributors during the first quarter. With continued strong cash generation, we expect to reduce our leverage ratio back within our target range in the near term. Based upon our first quarter results, we reaffirm our full year expectations of sales in the range of flat to down 5%, EPS of $3.75 to $4.20 per diluted share, and free cash flow generation of at least 90% of net income.”

The following are results for the three months ended March 31, 2016 compared to the three months ended March 31, 2015:

  • Net sales were $1,776.0 million for the first quarter of 2016, compared to$1,816.3 million for the first quarter of 2015, a decrease of 2.2%. Normalized organic sales decreased 6.7%; foreign exchange rates negatively impacted sales by 2.6%, and were partially offset by the positive impacts from acquisitions and number of workdays of 3.9% and 3.2%, respectively.
  • Gross profit was $355.2 million, or 20.0% of net sales, for the first quarter of 2016, compared to $367.7 million, or 20.2% of net sales, for the first quarter of 2015. 
  • Selling, general and administrative (“SG&A”) expenses were $269.3 million, or 15.2% of net sales for the first quarter of 2016, compared to $264.6 million, or 14.6% of net sales, for the first quarter of 2015. 
  • Operating profit was $69.5 million for the current quarter, compared to $87.2 million for the first quarter of 2015. Operating profit as a percentage of net sales was 3.9% for the first quarter of 2016, compared to 4.8% for the first quarter 2015. 
  • Interest expense for the first quarter of 2016 was $18.8 million, compared to$20.9 million for the first quarter of 2015. Non-cash interest expense for the first quarter of 2016 and 2015, which includes amortization of debt discounts and deferred financing fees, interest related to uncertain tax positions, and accrued interest, was $3.7 million and $5.4 million, respectively.
  • The effective tax rate for the current quarter was 31.9%, compared to 29.4% for the prior year first quarter. The Company recognized a discrete item in the first quarter of 2016 related to the settlement of an outstanding tax matter, which increased the effective tax rate by 3.4 percentage points. 
  • Net income attributable to WESCO International, Inc. of $36.0 million for the current quarter was down 23.4% from $47.0 million for the prior year quarter. 
  • Earnings per diluted share for the first quarter of 2016 was $0.77 per share, based on 46.8 million diluted shares, compared to $0.90 per share in the first quarter of 2015, based on 52.2 million diluted shares. 
  • Free cash flow for the first quarter of 2016 was $75.0 million, or 217% of net income, compared to $85.1 million, or 182% of net income for the first quarter of 2015.

Mr. Engel continued, “We remain focused on executing our One WESCO strategy to deliver above-market sales growth, improve profitability, generate strong cash flow, and increase shareholder value. Our value proposition provides customers with the comprehensive product and service solutions they need to meet their MRO, OEM, and capital project management requirements. The free cash flow generation capability of our business supports continued investment in our growth initiatives, including acquisitions, where our pipeline remains robust and we see excellent ongoing opportunities to strengthen our electrical core and broaden our portfolio of products and services.”


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