Wesco International Inc. (NYSE:WCC) reports preliminary financial results for the quarter ended 2012-09-30.
Wesco International Inc. recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please visit www.capitalcube.com.
Wesco International Inc.’s analysis versus peers uses the following peer-set: W.W. Grainger Inc. (GWW), Avnet Inc. (AVT), Anixter International Inc. (AXE), Electrocomponents PLC (ECM), Premier Farnell PLC (PFL) and Houston Wire & Cable Co. (HWCC). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
|Quarterly (USD million)||2012-09-30||2012-06-30||2012-03-31||2011-12-31||2011-09-30|
|Revenue Growth %||(1.0)||4.2||1.0||0.6||3.7|
|Net Income Growth %||7.7||11.1||(3.4)||1.8||7.3|
|Net Margin %||3.8||3.5||3.3||3.5||3.4|
|ROE % (Annualized)||16.8||16.4||15.4||16.7||17.0|
|ROA % (Annualized)||7.7||7.4||6.8||7.1||7.1|
Wesco International Inc. trades at a lower Price/Book multiple (1.8) than its peer median (3.3). The market expects WCC-US to grow at about the same rate as its chosen peers (PE of 14.0 compared to peer median of 11.7) and to maintain the peer median return (ROE of 16.3%) it currently generates.
The company’s asset efficiency (asset turns of 2.0x) and net profit margins of 3.5% are both median for its peer group. WCC-US’s net margin continues to trend upward and is now similar to its five-year average net margin of 3.0%.
The company enjoys both better than peer median annual revenue growth of 21.0% and better than peer median earnings growth performance 69.9%. WCC-US currently converts every 1% of change in annual revenue into 3.3% of change in annual reported earnings. We view this company as a leader among its peers.
WCC-US’s current return on assets is around the same as its peer median (7.1% vs. peer median 8.5%). This recent performance contrasts with its less than peer median return on assets over the past five years (6.2% vs. peer median 9.4%) suggesting that the company’s relative operating performance is improving.
The company’s gross margin of 20.3% is around peer median suggesting that WCC-US’s operations do not benefit from any differentiating pricing advantage. In addition, WCC-US’s pre-tax margin is less than the peer median (5.0% compared to 6.9%) suggesting relatively high operating costs.
Growth & Investment Strategy
While WCC-US’s revenues growth has been below the peer median in the last few years (0.1% vs. 5.7% respectively for the past three years), the market still gives the stock an about peer median PE ratio of 14.0. The market seems to see the company as a long-term strategic bet.
WCC-US’s annualized rate of change in capital of 2.4% over the past three years is less than its peer median of 7.1%. This below median investment level has also generated a less than peer median return on capital of 7.4% averaged over the same three years. This outcome suggests that the company has invested capital relatively poorly and now may be in maintenance mode.
WCC-US’s net income margin for the last twelve months is around the peer median (3.5% vs. peer median of 4.3%). This average margin and relatively conservative accrual policy (0.8% vs. peer median of -0.0%) suggests possible understatement of its reported net income.
WCC-US’s accruals over the last twelve months are around zero. However, this modestly positive level is also greater than the peer median which suggests some amount of building of reserves.