Wesco International Inc. (WCC) is set to report fourth-quarter 2014 results on Jan 29. Last quarter, the company posted a positive earnings surprise of 1.33%. Let us see how things are shaping up for this announcement.
Factors to Consider
WESCO reported strong third quarter results with both the top and bottom lines exceeding expectations.Its third-quarter 2014 earnings of $1.52 per share beat the Zacks Consensus Estimate by 2 cents. Earnings increased 17.8% sequentially and 7% on a year-over-year basis. Both acquisitions and organic sales growth contributed to the improved performance.
It is also encouraging to note that although acquisitions helped sales in the last reported quarter, revenues also grew on an organic basis. WESCO’s business is currently being driven by strengthening end markets and its One WESCO value proposition, which increases efficiencies for its customers. For the longer term, we continue to believe in WESCO’s solid strategies, strong operating model, market position and customer clout.
Moreover, acquisitions will remain an important part of its growth strategy. The acquisition strategy will boost both top and bottom line performances in the near term. Moreover, it will augment its existing product lines and extend its worldwide footprint, thereby improving its overall market position.
Improving macroeconomic conditions in the U.S. and Canada will further drive the company’s performance. However, foreign exchange is expected to remain a drag.
For the fourth quarter of 2014, WESCO expects year-over-year revenue increase of at least 5%-8%. The gross margin is expected to be in the range of 20.4% – 20.6% while the operating margin is expected to be in the range of 6.4%-6.6%. The tax rate is expected to be roughly 28%.
WESCO recently reaffirmed its 2014 earnings per share (EPS) and sales outlook, provided its financial outlook for 2015 and declared its share repurchase program. The company expects earnings per share of $5.25-$5.35 for the year. Wesco Interntional announced a share repurchase program starting early this year. The $300 million share repurchase program is authorized through Dec 31, 2017.
Earnings Whispers?
Our proven model does not conclusively show that Wesco will beat earnings 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.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.49. Hence, Wesco's Earnings ESP is 0.00%.
Zacks Rank:Wesco currently carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Ellie Mae, Inc. (ELLI) has an Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy)
Cognizant Technology Solutions Corporation (CTSH) with an Earnings ESP of +1.69% and a Zacks Rank #2 (Buy).
Hutchinson Technology Inc. (HTCH) has an Earnings ESP of +7.69% and a Zacks Rank 2.
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