Wesco, an electrical and electronic components wholesaler and services provider, is the IBD Stock of the Day. WCC stock has formed a handle, and its relative strength line is testing multiyear highs
The stock is setting up as Wesco gears up for contracts related to the $1 trillion infrastructure spending plan passed by Congress in November. The Pittsburgh, PA.-based company has diversified, from its traditional utilities and power infrastructure clients, to growth in digital and big-data offerings.
It offers an array of electrical products and services intended to make supply chains more fluid and digitally-connected. In addition, it grabbed a big piece of the market in late 2020, acquiring network-infrastructure provider Anixter.
But even as it looks to technology to strengthen the world's distribution networks, the company, like many others, is still navigating the current supply-chain crunch.
WCC Stock
Shares of Wesco were down 2.3% to 129.84 in the stock market today. But the stock is holding well above support at its short-term, 21-day exponential moving average, as well as its 50-day line. Shares are just below a 133.72 buy point in a handle.
Meanwhile, WCC stock's relative strength line, which measures a stock's performance against the S&P 500, has pulled back only slightly since jumping to levels not seen since 2017. That can signal strength in a stock's pending breakout.
In addition, Wesco has a 94 Composite Rating. Its EPS Rating is 95.
Wall Street expects Wesco's earnings per share to increase 16% this year to $11.62. Analysts project a 7% rise in revenue, to $19.519 billion.
WCC Stock And A Fragmented Market
Wesco sells cables, wires and other connective, automation, broadband and Internet-of-Things gear, made by its manufacturing partners. Its serves customers in the construction and industrial businesses, as well as equipment manufacturers, public power companies and companies looking to strengthen network connectivity and cloud-data services.
Moreover, Wesco says its products and logistics know-how help businesses operate more sustainably, harness data to get a read on business trends, and handle last-mile deliveries.
Those customers are in dozens of countries, served by Wesco's 800 sales offices, warehouses and other facilities. Most of those are located in the U.S. and Canada, which drive most of the company's sales.
Wesco says it operates in a fragmented market. In an effort to consolidate that landscape, it merged with Anixter, which also offers network support services and sells thousands of wires, cables and other products to help with data connectivity.
The deal, the companies said in 2020, would create "a premier, industry-leading global B2B distribution and supply chain solutions company." And they said it would help the combined company take advantage of growing digitization trends and data demand.
The two companies merged as production and throughput at the world's ports, factories and warehouses remain choked by Covid restrictions and consumer demand for goods.
'Mid-Teens' Sales Gains For WCC Stock
Wesco's sales — and debt — jumped following that deal. Total debt for the company stood at $4.9 billion in 2020 and $4.7 billion at the end of 2021. In 2019, it was $1.3 billion.
Still, WCC stock is up 57% over the past 12 months. Wesco's fourth-quarter results, reported in February, beat expectations.
January sales were up "were up mid-teens versus the prior year," CFO David Schulz said at a conference this month. He said that momentum had spilled over into February. Sales for that month were "up in the teens" compared to the prior year.
Still, he said that the ongoing chip shortage, coupled with surging demand, have led to some delays for things like switches and fiber-optic cable.
"A lot of delays are being caused by the availability of the chip, for the manufacturing process, so particularly within our CSS business, high-tech switches require a semiconductor," he said. "That's where we've seen some disruptions."
