Wesco International Inc (WCC) is set to report third quarter 2013 results on Oct 24. Last quarter it posted a 7.14% negative surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Wesco’s second quarter earnings of $1.25 per share missed the Zacks Consensus Estimate by 10 cents. The revenue of Wesco was up both sequentially as well as on a year over year basis.
The year-over-year increase in revenue was attributable to the positive impact of acquisitions. Wesco has been able to maintain a steady gross margin over the past year on the basis of its integrated model and tight cost control.
For the longer term, Wesco is believed to benefit from its solid strategies, strong operating model, market position and customer clout. However, near-term results will continue to be impacted by economic activity, given the company’s exposure to core segments, such as industrial, utility, construction and government that should contain share price appreciation.
For the third quarter, Wesco expects year over year revenue to increase by atleast 17%-19%. The gross margin is expected to be at or above 20.8% while the operating margin is expected to be at least 6.2%.
Earnings Whispers?
Our proven model does not conclusively show that Wesco is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: That is because the Most Accurate estimate stands at $1.38 while the Zacks Consensus Estimate is higher at $1.41. Hence, the difference is -2.13%.
Zacks Rank #3 (Hold): Wesco’s Zacks Rank #3 (Hold) 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 you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
- Arrow Electronics (ARW), Earnings ESP of +0.83% and a Zacks #2 Rank (Buy)
- Jarden Corporation (JAH), Earnings ESP of +2.00% and a Zacks Rank #1 (Strong Buy)
- Asml Holding Nv (ASML), Earnings ESP of +4.17% and a Zacks Rank #3 (Hold)
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