On Friday, RBC Capital has adjusted its price target on WESCO International (NYSE:WCC) shares, reducing it to $171 from the previous $175, while maintaining a Sector Perform rating. The adjustment follows WESCO's reported earnings for the second quarter of 2024, which did not meet expectations, resulting in an operating miss of $0.36 per share or 7%.
Additionally, the company's projected earnings per share (EPS) for the full year 2024 have been lowered by 12% below the consensus.
The underperformance in the second quarter was attributed to weakened demand in several short-cycle sectors such as utility, construction/solar, and broadband.
Specifically, the utility sector faced challenges due to delayed government funding, regulatory uncertainties, and inventory issues that impacted demand. Consequently, WESCO has revised its outlook for both the utility and broadband sectors downward for 2024.
Despite the setbacks in certain sectors, WESCO experienced a positive development in its datacenter business, which saw an acceleration to a high-teens percentage growth rate. RBC Capital emphasized that WESCO's shortfall was not a result of execution errors or loss of market share.
For the company's stock to recover, analysts believe that WESCO needs to demonstrate sequential margin improvements through operating leverage and cost containment measures.
In other recent news, Wesco International (NYSE:WCC) finalized its acquisition of software company entroCIM. The initial transaction was completed for $30 million, with potential for additional performance-based earnout payments. The software firm is known for its data center and building intelligence software that enhances efficiency and reduces operational costs across various commercial facilities.
In more developments, Wesco declared dividends for both its common and preferred stock. The quarterly cash dividend for common stock has been set at $0.41 per share. Additionally, dividends on its 10.625% Series A Fixed-Rate Reset Cumulative Perpetual Preferred Stock have been declared, equating to $0.6640625 per depository share.
Analyst firm Baird downgraded Wesco from Outperform to Neutral, revising its price target to $195 from $200 due to concerns over revenue growth.
Conversely, Loop Capital raised Wesco's price target to $200 from $190, maintaining a "Buy" rating, citing strong free cash flow. Similarly, KeyBanc increased Wesco's price target to $205, up from $190, maintaining an Overweight rating following strong first-quarter results.
InvestingPro Insights
Following RBC Capital's price target adjustment on WESCO International (NYSE:WCC), investors may be seeking additional insights to better understand the company's position. According to recent InvestingPro data, WESCO's market capitalization stands at $8.07 billion, with a P/E ratio of 12.34, reflecting a market that currently values the company's earnings at a moderate level compared to industry peers. Notably, WESCO's revenue for the last twelve months as of Q2 2024 was approximately $21.95 billion, despite experiencing a slight revenue decline of 1.46% during that period.
InvestingPro Tips highlight that WESCO's management has been actively engaging in share buybacks, signaling confidence in the firm's value proposition. Additionally, the company's liquid assets surpass short-term obligations, providing financial stability. Analysts also predict profitability for WESCO this year, and the company has maintained profitability over the last twelve months. With a strong return over the last five years, WESCO is recognized as a prominent player in the Trading Companies & Distributors industry. For investors looking for more comprehensive analysis, there are over seven additional InvestingPro Tips available for WESCO at Investing.com/pro/WCC.
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