WESCO Breaks Down Strong Earnings Report

Following WESCO’s Q4 earnings report, which CEO John Engel referred to in a press release as “exceptional”, WESCO held its quarterly conference call with reporters to dig deeper into the results and to answer questions about the future. Reporters broke down the question and answer session into three categories: supply chain issues, mergers and acquisitions, and a focus on the future using data and artificial intelligence.

Supply Chain Issues

“We strategically invested in our inventories last year to address the global supply chain challenges as well as support our strong pipeline of sales growth opportunities,” Engel told reporters near the beginning of the conference call. While WESCO is dealing with shortages just like all electrical distributors, organic sales increased by 6% while WESCO’s backlog increased by 14%.

“In terms of backlog, we would not have expected it to grow sequentially every month in 2021. In my tenure, that has never occurred,” Engel added. “And that’s why it gives us the confidence with the inventory build that we put in place. With that said, we would expect that as supply chains are rebuilt, and we continue to convert on the demand side of our value chain with sales out the door, that we’ll begin to work some of that backlog down.”

Engel also said he was extremely pleased with December’s results, which then led to a strong January 2022. “We obviously finished much stronger than we thought in December,” Engel said. “And what was even more encouraging and even a bit surprising is with that strong December close, we got out of the gate very strong in January. And the strength is really reflected in the backlog build sequentially the sales growth sequentially in Q4. Then you look at January with where we are in terms of prior year preliminary results, just overall very strong.”

Mergers And Acquisitions

While Engel wouldn’t get into any specifics in terms of acquisition activity, he did say mergers and acquisitions is a key strategy for WESCO, even after last year’s Anixter acquisition.

“If you look at WESCO’s history, since we became a publicly traded company, we clearly have used M&A as a value creation lever,” Engel told reporters. “And the value chain that we’re in, and particularly our portion of the value chain, which is really the most relevant point, still remains fragmented, highly fragmented. And so as we look forward, m&a is going to clearly be one of the levers that we use to support our overall value creation.

Data And Artificial Intelligence

WESCO repeatedly talked about how it is gathering “big data” to help strategize now and in the future.

“The digital applications that we are investing in unlocks the power of our big data,” Engel explained. “There’s a plethora of opportunities that continue to drive margins up. And I alluded to a few of the digital products that we launched inside our four walls in the last call. One is focused on intelligent pricing. Another is focused on an AI-enabled product search function. Those are two that are underway now, and we’re deploying them across our enterprise.

“We are focused on applications, I’ll use the term inside our four walls. So applications that would leverage the power of our big data, and we spent a substantial amount of work, with focus in these first 18 months taking WESCO’s big data and Anixter’s big data, putting it together into one brand new world-class data group and beginning to operationalize that data to run our business better.”

WESCO also talked about its new logo, which was unveiled late last year. The new, green “W” branding, according to the WESCO website, “is more than a change in the design of our logo. It is a visual representation of the coming together of WESCO and Anixter to drive growth and innovation, sustainably and responsibly.”

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Discussion (1 comments)

    Leslie February 18, 2022 / 4:27 pm

    Clarification for 2nd paragraph: “organic sales increased by 6% while WESCO’s backlog increased by 14%.” Those are sequential comparisons to 3Q21. Wesco 4Q21 record sales were up 16% YOY on an organic basis.”

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