WESCO International Inc. (WCC) is set to report second-quarter fiscal 2014 results on Jul 24. Last quarter, it posted a 10.19% negative surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
WESCO posted dismal first quarter 2014 results with both the top and bottom lines missing the Zacks Consensus Estimate. The year-over-year revenue increase of 0.2% was attributable to the positive impact of acquisitions, better pricing and organic sales growth, partially offset by harsh weather conditions, which deferred weather-related projects, and an adverse foreign exchange impact. Despite dismal earnings, WESCO’s business is being driven by strengthening end markets and an integrated supply model, which increase efficiencies for its customers.
Moreover, WESCO recently acquired Hi-Line Utility Supply, a provider of utility maintenance, repair, operations and safety products, as well as rubber goods testing and certification services. The acquisition will enhance WESCO’s utility products and service offerings, which will strengthen its portfolio within the utility and industrial end markets.
For the second quarter, WESCO expects year-over-year revenue increase of at least 5-8%. Gross margin is expected to be in the range of 20.6-20.8% while operating margin is expected to be in the range of 5.7-6.1%. The tax rate is expected to be roughly 28%.
Earnings Whispers?
Our proven model does not conclusively show that WESCO International will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Negative Zacks ESP: The Most Accurate estimate stands at $1.31 while the Zacks Consensus Estimate is higher at $1.34. That is a difference of –2.24%.
Zacks Rank: WESCO International’s Zacks Rank #2 (Buy) when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
- Charter Communications, Inc. (CHTR), with Earnings ESP of +387.50% and a Zacks Rank #1 (Strong Buy)
- NVIDIA Corp. (NVDA), with Earnings ESP of +31.58% and a Zacks Rank #1
- Silicon Motion Technology Corp. (SIMO), with Earnings ESP of +33.33% and a Zacks Rank #1
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