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On Monday, Oppenheimer analyst Christopher Glynn adjusted the price target for WESCO International (NYSE:WCC) shares to $195 from the previous $225 while maintaining an Outperform rating. The $8 billion market cap company, currently trading at 12.3x earnings, is showing signs of being undervalued according to InvestingPro analysis. Glynn noted that WESCO’s sales exceeded expectations, largely due to a significant increase in revenue from Wesco Data Center Solutions (WDCS), which soared by 65%. WDCS’s contribution to WESCO’s first-quarter sales was 16%, up from 14% in the trailing twelve months.
Despite strong sales, Glynn pointed out that earnings per share (EPS) and margins were impacted negatively by a mix of headwinds within the Electrical & Electronic Solutions (ESS) segment. The ESS-OEM sub-segment showed high single-digit organic growth, contributing to a 3.4% organic increase for the entire ESS segment. This growth was tempered by a low single-digit rise in construction sales and flat industrial sales. The operating margin for ESS was reported at 6.3%, which is a 90 basis points drop from the anticipated 7.5% and 20 basis points increase.
The analyst also highlighted that Utility Broadband Solutions (UBS) sales fell by 19%, more than the 14% decline that had been estimated. The organic decline of 5% reflected ongoing destocking by utility customers. However, WESCO remains optimistic about the UBS segment’s organic growth in the second half of the year, expecting improvements due to easier comparisons, customer budget plans, a shift in utilities’ post-destocking activities, and the ramping up of new customer competitive conversions. Additionally, the first quarter of 2025 marked the final period of comparison against the divestiture of WESCO’s legacy WIS division. For detailed analysis and 8 additional exclusive insights about WESCO’s financial health and growth prospects, visit InvestingPro, where you’ll find comprehensive research reports and expert analysis.
In other recent news, WESCO International Inc. disclosed its first-quarter 2025 financial results, showing earnings per share (EPS) of $2.21, which did not meet the forecasted $2.33. However, the company exceeded revenue expectations with $5.34 billion, surpassing the anticipated $5.27 billion. This revenue beat was largely driven by a 6% increase in organic sales and significant growth in the data center business. Despite these positive revenue figures, the EPS shortfall reflects challenges in maintaining profitability amid market volatility. The company continues to expand its data center operations, which now represent 16% of total sales, an increase from 10% previously. WESCO reaffirmed its full-year 2025 outlook, expecting reported sales growth of about 20% and free cash flow between $600 million and $800 million. Additionally, analysts from firms such as Jefferies and Wolfe Research inquired about the company’s pricing strategies and tariff impacts during the earnings call. WESCO’s management assured that they are executing strategic plans to manage market volatility and supply chain challenges effectively.
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