Electrical supplies distributor Wesco reported its third quarter financial results on Oct. 31, which showed a slight increase in sales driven by the company’s communications and security solutions segment.
The Pittsburgh-based company posted total 3Q sales of $5.5 billion, down 2.7% year-over-year, with organic sales down 0.6% as the company’s 1Q sale of its Wesco Integrated Supply business unit for $350 million to Vallen Distribution drove most of the overall decline. Wesco said the organic sales decline reflects volume declines in its Electrical and Electronic Solutions (EES) and Utility and Broadband Solutions (UBS) segments, partially offset by volume increase in the Communications and Security Solutions (CSS) segment and price inflation in the EES and UBS segments.
MDM Podcast: The Keys to Wesco’s Digital Initiatives (August)
Wesco’s 3Q gross margin of 22.1% was up 50 basis points year-over-year and up 20 bps from 2Q24. Meanwhile, 3Q operating profit of $335.6 million fell 11.8% year-over-year as operating margin of 6.2% was down 90 bps year-over-year and down 110 bps sequentially. Adjusted EBITDA margin of 7.3% was down 80 bps year-over-year and flat sequentially.
“We had a strong close to our third quarter, with sales slightly up compared to the second quarter driven by accelerating momentum in our Communications and Security Solutions segment, including double-digit sales growth in our global data center business,” Wesco Chairman, President & CEO John Engel said in the company’s financial release. “The continued weakness in Utility and Broadband Solutions offset what would have been a return to organic growth in the quarter. Adjusted EBITDA margin was flat compared to the second quarter and better than the expectations reviewed during our Investor Day last month, primarily driven by a sequential increase in gross margin.”
By Wesco business unity in 3Q:
- Electrical & Electronic Solution (EES) sales of $2.1 billion fell 1.8% year-over-year, with organic sales down by 2.9%. Adjusted EBITDA rose by 8.7% year-over-year.
- Communications & Security Solutions (CSS) sales of $1.9 billion increased 10% year-over-year, with organic sales up 8.5%. Adjusted EBITDA rose by 9% year-over-year.
- Utility & Broadband Solutions (UBS) sales of $1.3 billion decreased 17.5% year-over-year, while organic sales decreased 7.2%. Adjusted EBITDA rose by 11.3% year-over-year.
2024 Outlook
In updating its 2024 full-year outlook, Wesco reaffirmed its outlook for sales, profitability and free cash flow. The company expects total organic growth of -1.5% to 0.5% ($21.6 to $22.6 billion). The Integrated Supply Divestiture is expected to have a -3% impact on full-year sales. The company forecasts full-year adjusted EBITDA margin of 7%-7.3%.
The company was No. 1 on MDM’s Top Distributors List for Electrical/Data/Security Supplies.
MDM’s Wesco Case Study
This Summer, we took a deep dive on Wesco to produce an MDM Case Study on the distributor. Premium members can download it here, while non-members can find it here in the MDM Store.
We prefaced that case study with a three-part Premium article series:
- Wesco Analysis, Pt. 1: Scale and Value Proposition
- Wesco Analysis, Pt. 2: Enterprise Strategies
- Wesco Analysis, Pt. 3: Digitize the Business
And to decompress that series and case study, we had an MDM Podcast with the series’ author, John Gunderson
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