WCC - WESCO International: Healthy Demand Drivers And Attractive Valuations (Rating Upgrade)

2024-05-20 21:47:38 ET

Summary

• WESCO International's Q1 2024 sales declined due to volume declines across all segments, but the company's revenue growth outlook is positive.
• The company is poised to benefit from electrification, broadband expansion, infrastructure build, and data center demand in the medium to long term.
• The company's margins were adversely impacted in Q1 2024, but they are expected to sequentially improve in the coming quarters.

Investment Thesis

While WESCO International, Inc. ( WCC ) has seen a slowdown in growth in the last few quarters, its revenues should return to growth in the coming quarters thanks to the easing comparisons and stable demand trends. Further, increased spending on infrastructure, electrification, broadband expansion, grid modernization, and data centers should result in good end-market demand and contribute to revenue growth in the medium to long term. Additionally, the company has a good track record of outpacing its distribution peers and publicly listed suppliers in sales growth thanks to its good execution, which I expect to continue helping the company drive above-market growth. Apart from organic growth, the company’s reasonable net leverage of 2.6x should also enable it to pursue its bolt-on acquisition strategy which should complement its organic growth....

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