In This Article:
Electrical supply company WESCO (NYSE:WCC) announced better-than-expected revenue in Q1 CY2025, but sales were flat year on year at $5.34 billion. Its non-GAAP profit of $2.21 per share was 4.7% below analysts’ consensus estimates.
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WESCO (WCC) Q1 CY2025 Highlights:
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Revenue: $5.34 billion vs analyst estimates of $5.25 billion (flat year on year, 1.8% beat)
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Adjusted EPS: $2.21 vs analyst expectations of $2.32 (4.7% miss)
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Adjusted EBITDA: $310.7 million vs analyst estimates of $323 million (5.8% margin, 3.8% miss)
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Operating Margin: 4.5%, in line with the same quarter last year
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Free Cash Flow Margin: 0.2%, down from 13.7% in the same quarter last year
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Organic Revenue rose 5.6% year on year (-3.2% in the same quarter last year)
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Market Capitalization: $8.49 billion
StockStory’s Take
WESCO’s first quarter results were shaped by significant growth in its data center and broadband segments, partially offset by continued weakness in utility markets. Management highlighted that organic sales rose 6%, driven by a 70% surge in data center business and high single-digit increases in both OEM and broadband. CEO John Engel attributed this performance to expanding customer partnerships and successful execution of cross-sell initiatives. He emphasized, "Our data center solutions now encompass everything from electrical distribution to advanced IT infrastructure, allowing us to meet evolving customer needs across all phases of the data center lifecycle."
Looking ahead, management reaffirmed its full-year outlook, despite acknowledging uncertainty from recently announced global tariffs. CFO Dave Schulz noted that WESCO’s guidance does not incorporate potential pricing actions related to tariffs, citing a typical two-quarter lag between supplier price increases and revenue impact. The company is focused on passing through supplier increases, optimizing its supply chain, and leveraging inventory to cushion against cost volatility. Engel stated, "We remain focused on what we can control—gross margin expansion, operational improvements, and managing supply chain risks."
Key Insights from Management’s Remarks
WESCO’s Q1 performance was driven by strong momentum in key growth areas, while management addressed ongoing challenges in utility markets and supply chain volatility. The company’s leadership detailed several business dynamics influencing the quarter’s results and shared insights into strategic initiatives for the remainder of the year.
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Data Center Expansion: The data center business grew approximately 70%, with hyperscale customers increasing their scope of supply. Management highlighted the benefit of acquisitions like Rahi and entroCIM, which expanded WESCO’s offerings across the data center lifecycle.
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Utility Market Headwinds: Continued softness in the utility segment was attributed to customer inventory destocking and lower project activity, linked to interest rates and regulatory delays. Management maintained confidence in a second-half recovery, citing secular trends in electrification and grid modernization.
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Tariff and Supply Chain Response: The company is experiencing a sharp increase in supplier price notifications due to new tariffs, particularly in the electrical and utility business units. Leadership outlined a playbook involving passing through price increases, sourcing locally, and optimizing logistics to mitigate margin risk.
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Product and Project Mix Impact: Lower gross margins were attributed to a higher mix of large, lower-margin projects, especially in EES and CSS business units. Management expects margin improvement as the mix normalizes and service-related revenues grow.
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Financial Flexibility Increased: WESCO issued $800 million in new senior notes to redeem preferred stock, extend debt maturities, and improve financial flexibility. This move is expected to lower annual financing costs and provide greater capital allocation optionality.