WESCO International Inc (WCC) Q3 2024 Earnings Call Highlights: Data Center Growth and ...

GuruFocus News
4 min read

In This Article:

  • Revenue: Sales up slightly versus the second quarter, driven by double-digit growth in the data center business.

  • Adjusted EBITDA Margin: Flat sequentially, with a 50 basis point increase over the prior year.

  • Free Cash Flow: $280 million in the third quarter, $777 million year-to-date, equating to 154% of adjusted net income.

  • Gross Margin: Up 50 basis points year-over-year, with a 20 basis point sequential increase.

  • CSS Sales: Up 8% year-over-year on an organic basis, driven by over 40% growth in data center solutions.

  • EES Organic Sales: Down 3% in the third quarter.

  • UBS Organic Sales: Down 70% in the quarter, with reported sales down 18% due to divestiture.

  • Backlog: CSS backlog up 8% sequentially and 15% year-over-year; UBS backlog down 7% sequentially and 14% year-over-year.

  • Share Repurchases: $375 million worth of common shares repurchased this year.

  • Net Debt Reduction: Reduced by approximately $475 million.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • WESCO International Inc (NYSE:WCC) reported strong growth in its data center solutions business, with sales up more than 40% year-over-year.

  • The company generated $280 million in free cash flow during the third quarter, representing 145% of adjusted net income.

  • WESCO International Inc (NYSE:WCC) has maintained its full-year 2024 outlook for sales, profitability, and free cash flow.

  • The company has repurchased $375 million worth of common shares and reduced net debt by $475 million this year.

  • WESCO International Inc (NYSE:WCC) continues to benefit from secular growth trends in electrification, automation, and green energy, which are expected to drive future growth.

Negative Points

  • The utility and broadband segments experienced continued weakness, impacting overall sales growth.

  • The divestiture of the integrated supply business posed a headwind of approximately 350 basis points.

  • The company expects to be within the lower half of its outlook range for sales and adjusted EBITDA margin if current trends continue.

  • Inventory levels have not decreased as expected due to lower-than-anticipated sales in certain segments.

  • The macroeconomic environment remains mixed, with challenges in the industrial and solar markets impacting performance.

Q & A Highlights

Q: Can you provide insights on the impact of storm activity in October and the backlog erosion in the UBS segment? A: David Schulz, CFO, explained that the hurricane impact was neutral in September, with utility benefits offset by branch shutdowns. The UBS backlog is not being replenished at the same rate due to current market conditions, but this is seen as temporary. John Engel, CEO, added that large contracts, like a $2 billion UBS contract, don't immediately reflect in backlog figures, indicating strong long-term prospects.

Recommended Stories