WESCO International (WCC) is set to report fourth-quarter 2013 results on Jan 30. Last quarter, it posted a 0.71% positive surprise. Let us see how things are shaping up for this announcement.
Growth Factors this Past Quarter
WESCO’s fourth-quarter earnings beat the Zacks Consensus Estimate by a penny. Revenues were up 2.1% sequentially and 16.6% year over year. The increase was attributable to the positive impact of acquisitions, partially offset by a reduction in organic sales and unfavorable currency movements.
In the last quarter, WESCO saw signs of strength across end markets, with an expanding pipeline, higher bidding activity and growing backlog. The company reported steady gross margins owing to its integrated model and tight cost control.
For the fourth quarter of 2013, WESCO expects year-over-year revenue increase of at least 14%–17%. The gross margin is expected to be 20.5% or above while the operating margin is expected to be at least 6%.
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 ESPand 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 $1.33. Hence, the difference is 0.00%.
Zacks Rank #2 (Buy): Wesco’s Zacks Rank when combined with a 0.00% 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
You could consider other stocks with a positive earnings ESP and a Zacks Rank #1, 2 or 3 such as:
Melco Crown Entertainment Ltd. (MPEL), with Earnings ESP of +2.50% and a Zacks Rank #1 (Strong Buy).
Waddell & Reed Financial, Inc. (WDR), with Earnings ESP of +2.44% and a Zacks Rank #1.
Aspen Insurance Holdings Ltd. (AHL), with Earnings ESP of +3.57% and a Zacks Rank #1.
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