WESCO International, Inc. (WCC) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the WESCO First Quarter 2021 Earnings Conference. Please note that this event is being recorded. I would now like to turn the conference over to Leslie Hunziker, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead. Leslie Hunziker: Thank you, and good morning, everyone. Before we get started, I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not guarantees of performance and by their nature, are subject to inherent uncertainties. Actual results may differ materially. Please see our webcast slides as well as the company's SEC filings for additional risk factors and disclosures. Any forward-looking information relayed on this call speaks only as of this date and the company undertakes no obligation to update the information to reflect the changed circumstances. Today, we'll use certain non-GAAP financial measures. John Engel: Thank you, Leslie, and good morning, everyone. We're off to a great start in 2021, outperforming our markets, accelerating execution of our integration plan and synergy capture, delivering significant margin expansion and generating very strong free cash flow. First quarter results were excellent across the board. I'm very proud of our team. I want to thank them for the great work that they're doing. We're seeing positive sales momentum across each of our three global business units, and backlog has reached a new all-time record level. Workday adjusted sales were up more than 3% versus last year and were also up 1% versus the first quarter of 2019 on a pro forma basis. Against a tough year-over-year comparison, we delivered sales at pre-COVID levels as the economic recovery is under way and demand is building in nearly every end market we serve. This ramp-up in activity, coupled with continued benefits from secular growth trends and our sales synergies, including cross-selling and value-based pricing initiatives, is setting the stage for our top line performance is better than our initial expectations for the year. We're making great progress on our margin improvement program as well, reflecting our ability to more than offset cost inflation. In the first quarter, gross margin was up 50 basis points versus last year and was up 40 basis points versus the first quarter of 2019. These are pro forma comparisons. Gross margin also expanded 50 basis points sequentially versus the fourth quarter of 2020. Strong execution of our margin improvement initiatives drove gross margin expansion across each of our three business units. We're also making great progress on our integration plan and are accelerating our execution and synergy capture. As sales grew and gross margin expanded, the torque on our operating leverage increased, reflecting the benefits of our structural cost reduction initiatives in our operating profit growth. As you saw in our press release earlier this morning, due to our strong first quarter results and accelerated synergy realization to start the year, we have raised our full year 2021 outlook for sales, synergies and profitability. Finally, we generated strong cash and paid down debt in the first quarter, as we expect to do every quarter through the integration. The power of our business model is clearly being demonstrated. Dave Schulz: Thanks, John, and good morning, everyone. Starting on Slide 7, this summary table compares our first quarter to the prior year pro forma results. Sales were flat in the first quarter, noting there were two fewer workdays this quarter compared to the prior year period. On a workday adjusted basis, sales were up more than 3% on positive contributions from pricing and currency. Backlog reached another record level this quarter, up more than 20% since the end of December, with each business unit posting double-digit increases. Gross margin was 20.1% in the quarter, up 50 basis points compared to the prior year and up 50 basis points sequentially. This is our highest gross margin since 2016 on a pro forma basis. These results were broad-based and reflect the impact of our gross margin improvement initiatives started in previous periods, including the deployment of Anixter's margin improvement program across the combined business. As we have discussed previously, our margin improvement program focuses on value-based pricing and emphasizes training and development of our sales force. In addition to a proactive approach to cost pass through, our sales reps focused on managing freight costs, minimum order quantity and ensuring we are incorporating our portfolio of supply chain services in customer discussions. We also aligned incentives across the sales force to reward margin improvement. Gross margin included a 20 basis point negative impact from a $9 million writedown to inventory of personal protective equipment. Both business unit mix and supplier volume rebates were neutral to gross margin versus the prior year. Adjusted income from operations was $171 million in the quarter or 4.2% of sales after adjusting out the effect of merger-related costs of $46 million and a $9 million gain on the divestitures of the legacy WESCO Datacom and Utility businesses in Canada that we announced in February. Adjusted EBITDA, which also excludes the merger-related costs and gain on the divestitures as well as stock-based compensation and other net adjustments, was $217 million, $35 million higher than the prior year and 5.4% of sales, 90 basis points above the prior year pro forma. I'll walk you through the details of this strong result in a moment. Adjusted diluted EPS for the quarter was $1.43. A full reconciliation of adjusted EPS is included in our press release. Preliminary results for April are encouraging, with sales up approximately 20% albeit versus the first full month of COVID impact in the base year, where sales were down approximately 16%. Of note, gross margins in April are in line with Q1 results. Turning to Page 8. We've made substantial progress on our integration with Anixter. We captured $34 million of cost synergies in the quarter, favorable to the $28 million we expected. John Engel: Thanks, Dave. Well, we've covered a lot of material this morning. Before opening the call to your questions, I'd like to walk you through a quick summary of the key takeaways. The positive momentum for our transformational year in 2020 has clearly continued into 2021, and we're off to a great start. Results were strong across the board this quarter with sales up, and each of our three global businesses reporting higher adjusted EBITDA margin. We are clearly capitalizing on our market-leading position and driving increased operating leverage across the enterprise. We are also benefiting from secular growth trends that provide upside for all of our businesses. And we are well positioned to continue benefiting from these trends in the years ahead strong cash generation capabilities enable us to delever the balance sheet rapidly. In the first nine months post close, we have already reduced leverage by nearly a full turn. The execution of our integration with Anixter has progressed even faster than we anticipated. We've increased our cost synergy expectations by $40 million for 2021. And lastly, we are pleased to have substantially increased our outlook for sales and profitability for the balance of 2021. Our performance and the improving macro environment support our stronger 2021 outlook. With that, I'd like to open the call to your questions. Operator: And our first question today will come from Deane Dray with RBC Capital Markets. Deane Dray: Nice execution. It is such a hot topic across the industrials. I was hoping you could walk through some of the price cost dynamics that you've seen, including freight. And Dave, in his wrap up comments cited supply chain recovery. And so just if you could give us some color on supply chain disruptions as you're seeing them today, and what's embedded in your guidance? John Engel: So in terms of pricing, clearly, we saw inflation stepping up across a number of commodity categories and other parts. And this is kind of in line with the overall economic recovery cycle. If you – and we typically share this each quarter. If you look at the number of supplier price increases versus what we would typically see in the first quarter and the average price increase, both are up materially in the first quarter of 2021 versus first quarter of 2020 and even prior years. So clearly, there's been a step up there. I think that, as we shared and as you can see in the results, we feel very good about our execution of our gross margin improvement programs, and we clearly think that we're doing a good job of pricing the value in. So that's overall price cost question, Dean. In terms of supply chain disruptions, we have not seen any material disruptions in the first quarter. I think we've done a very nice job of working with our top supplier partners in ensuring integrity in the supply chain as we can manage it for our customers. Remember, we doubled the size of the company. So we've strengthened our supplier partnerships. We have broad and deep inventories. I think if you see through our results, we added to our inventory position in the first quarter, it's critically important to us that we have the proper inventory and we can support both availability of what our customers' demands are as the economy recovers as well as support strong fill rates. With all that said, I think this is something that clearly represents a challenge for certain product categories, a number of product categories, and it's the overall global supply chain. The supply chains are working to get fully rebuilt. The disruption that was caused by COVID was substantial across all facets of all the economies around the world. So clearly, there's challenges there. The way we're trying to work that is, again, with our expanded inventory position and our relationships with our supplier base. Deane Dray: That's really helpful. And if I could just clarify because I know you guys track this closely when you talk about the number of supplier price increases and the average price increases. Is that still within a manageable level? Because, historically, this inflationary environment is actually very attractive for WESCO as a distributor. So are we still in that sweet spot? Or has the volume of either of those kind of pushed it to where you're actually getting some pressures? John Engel: No, definitely favorable, Dean. We – I think what we're doing a better job of versus what we've ever done historically, and again, I'll credit the combination of Anixter and WESCO coming together and the teams have been working on this revised margin improvement program across the combined enterprise, I have to give a full credit to our combined team on that. Anixter had a good very good momentum. If you look at their gross margin results, which were public prior to the merger close in June of last year, they had upwards of two years every quarter of gross margin expansion against a market that was not supporting that, right, when you look at the other publicly traded distributors. So – but the short answer to your question is yes. I think we're doing a better job when we ever have a pricing value. And look, inflation is not done. I mean we're in – you look at where we are in the economic recovery cycle, inflation is going to continue as the economy recovers. And I feel very good thing about where we are so far through the first quarter. Deane Dray: That's great to hear. And then my second question would be for Dave. And just the really strong free cash flow conversion this quarter, the deleveraging is happening actually faster than what we were modeling. And it's not lost on us that you're already into the four handle on net leverage. So it really does beg a couple of questions. One, is there anything one-timer related in the free cash flow this quarter and within your guide because you're still at 100%, I see? And is it too much to ask for a little more color in terms of the path of deleveraging? Is there a goal for 2021? Any kind of milestones would be helpful here. Dave Schulz: Yes, Dean, thanks for the questions. The – I would tell you that there's not anything substantial in our free cash flow results for the first quarter. Relative to the prior year, the only thing that you could call out that is up is you do see a significant change in that other net, which is including some of the compensation accruals that, of course, we have not paid out. So that's – the only area that I would say is a minor benefit that we're seeing within the first quarter free cash flow results. And your question about leverage. As we mentioned, this has been our key priority. And getting back to our target leverage range three years post close is what we're focused on. We've not provided any specific glide path on how we anticipate getting there or by when. Operator: And our next question will come from Sam Darkatsh with Raymond James. Sam Darkatsh: Three questions, if I could be forgiven, they're hopefully pretty quick. The first one, Dave, should we still view gross margins as rising sequentially each quarter this year? I know I'm guessing rebates are going to be exceeding original expectations. You're getting increased traction from your internal initiatives. You talked about favorable price cost, you have the roll-off of the PPE inventory. Is that a fair characterization that gross margins would raise as the year progresses? Dave Schulz: Yes, Sam. We've not provided any specific guidance for our gross margin. I think you've hit upon a couple of things that we are really focused on. The first is, we're very pleased with the progress we made on the gross margin improvement plan. And we do anticipate to continue to incent our sales force and work very hard to continue to get good execution on gross margin. The one thing I will highlight is we did take the writedown on the personal protective equipment, as highlighted in our prepared remarks. We still are carrying some inventory, so we'll continue to monitor what the market conditions are like and whether or not we have to take another writedown in the future quarter. Sam Darkatsh: Second question, the $40 million increase in synergies from your prior views, is any of that in cost of sales? Or how much of that is in cost of sales? And where are you in the vendor negotiation process? Because I know that you were hesitant or reticent to include a lot of purchasing synergies until those were completed. Dave Schulz: Yes, Sam, the benefit that we're seeing in the increase year-over-year and our outlook for the synergies, the plus $40 million, it's primarily SG&A still. And that's part of the execution of some of the organization redesign that we're under way with. We've got a good portion of that done here in the first quarter. We'll complete that in the second quarter. There are some gross margin benefits that we do anticipate will be realized in the second half of 2021. But again, the majority of the savings in 2021 will still be on the SG&A line. You specifically mentioned supplier volume rebates. That's something that we are continuing to work. Remember that a lot of the benefit that we'll see there is as our sales and purchases grow. And we're flat year-over-year versus the prior pro forma period. So from that perspective, there is an opportunity there. We're continuing to work it hard. Sam Darkatsh: And my last question is just a follow-up on Dean's point around pricing. Dave, can you specifically quantify what pricing was in the first quarter year-on-year? And then how much within your guidance is inclusive of price versus volumes? Dave Schulz: Certainly. So we estimate one to two points of positive pricing in the first quarter of 2021. As we've mentioned before, it's extremely difficult for us to predict the benefit of pricing for the balance of the year. So we've not included any specific pricing benefit for the following three quarters of 2021. Operator: And our next question will come from Nigel Coe with Wolfe Research. Nigel Coe: I want to pick up on the price question. I think one of your competitors called out North American pricing for noncable of 3.6%. And obviously, that's well ahead of what you just called out there. Do you think there's potential to maybe push up to those kinds of level price given the inflation pressures? Dave Schulz: Nigel, its Dave Schulz. So there's always the potential. And we saw some of the market estimates of pricing by category. Again, we've always talked about there being a lag between when we get those supplier price increased notifications to when we start to see it in our results. So is there the potential for there to be more pricing in the balance of 2021? There is. But again, that will really be dependent upon the macro environment, how quickly supply chain covers and really what's that underlying demand. And again, a lot of that's being driven by the residential side. Within the electrical space, which we don't participate to a meaningful level. Nigel Coe: Great. And then it's great to see you're getting some benefits already from the rural broadband funding. That $20 billion, how much of that $20 billion do you think speaks to WESCO products? And what do you think your fair share of that TAM might be over the next several years? John Engel: It's a great question. And we've not gone public on what I'll say the conversion rate is on the publicized number. I will just maybe share a little bit of this is 100% in our sweet spot. When you – and I'll take a moment, Nigel, just to provide a little color because I think it's important. Both WESCO, legacy WESCO and legacy Anixter, had participated in the broadband business. When you actually look at what each company was strong, collective strengths or respective strengths, it was a much more complementary combination than we had realized or anticipated. I did make a comment on that several earnings calls ago, not the last one, but the prior one. So I am really pleased with how those teams have come together. We have one overall broadband leader for the combined business. It's part of our UBS strategic business unit or segment. And that broadband leader is a leader. And we've got a terrific set of capabilities to support that broadband build out and drive specification driven solutions in conjunction with our supplier partner base. So I think what's really important to understand here – and we cited that this example, and Dave did in his comments because it's something you can all see. But I will make this comment that the broadband build out and the acceleration of 5G represents a secular growth trend that's very strong in both across the U.S. and Canada. And this is just one of the, I'll call it, catalysts that are helping drive that secular growth trend. Nigel Coe: Absolutely. And then I'd really love to hear your comments on labor constraints because we talk a lot about supply chain, but the labor and hiring the right skill labor seems to be a real challenge right now. So I'm just curious what you're seeing out there in the labor market? And how much of your full year '21 plan is contingent on hiring the right kind of personnel here? John Engel: So I would – I'll give you an answer, maybe you don't expect the first part of this answer. We're first very much focused on it with respect to our customers. Because one of – part of our core value proposition is providing more efficient, more effective solutions, whether it's a construction project build, whether it's MRO supplies, where we can pick up additional outsourcing and they outsource we're they're constrained on an OEM build and ramp-up in conjunction with the industrial recovery will provide more effective solutions there. So we're in the value chain. We're myopically focused on our customers' operations and value chain. And this – that constraint, as it's manifesting itself, we have very specific services and solutions that target that. This is really important. Now with respect to ourselves, I call it WESCO and Anixter coming together, remember, we've gone through an aggressive integration program. We're three quarters into a three year plus program. And we've taken structural cost out. We've been selecting the best of the best talent across both organizations to staff the new combined company. And we've got the management team completely in place. And as Dave said, we're a quarter plus away from essentially being done with the organization redesign and structural cost take-out relative to our labor force and headcount, having that be completed. We are, right now, not seeing any constraints in our labor force that are material, that are impacting our ability, again, that impacted the Q1 results. One area where we are – I will call out, where we are aggressively adding additional talent is in the digital and IT area. So remember, we are looking at driving a digital transformation of our business. And in doing that, we expect to lead the digital transformation of our industry, and that is an area where we are ingesting talent from the outside. And I'm very pleased with the results we've had thus far in the new additions to our talent base, particularly that have accelerated when – upon the hire and since the hire of our CIO and Chief Digital Officer, Akash Karada. And he's been on Board better – in 2021. And the momentum of our IT and digital teams is accelerating. I'm very pleased with that. But we'll continue to add talent in that part of the business. Operator: And our next question will come from David Manthey with Baird. David Manthey: So from what Dave just said, it sounds like none of the revenue or EBITDA guidance increase contemplates upside to inflation, that sort of is so I guess it looks like most of the EBITDA guidance increases because of the synergies. But I mean, given the strong selling margin you saw in the first quarter, I would have thought that gross margin would have been a bigger contributor to your outlook upside. So I'm just wondering, was the gross margin in the first quarter was it consistent with your expectations? Or was it actually a little bit better than what you contemplated in original guidance? Dave Schulz: Yes, Dave. So I would point you to, we've taken our adjusted EBITDA guidance to 40 basis points improvement versus our previous outlook. So of that 40 basis points, roughly half of that is the increase in the synergies we expect to achieve. The other half is based on the performance that we've been seeing through the first half of the year and how we believe we're set up for the balance of the year. Again, we're very much focused on improving our EBITDA margins. We know that gross margin has been a key focus area for the company. We've not specifically guided that. But going back to your question of the 40 basis points is a combination of synergies, continued margin improvement programs and the benefit of scale of the additional top line. David Manthey: Okay. And then as it relates to the Utility area, if you look at DOE funding and infrastructure investment, in general, the grid hardening, etc, plus what you just said about the broadband space. So if you look at electrical plus broadband, I mean, it sounds like the UBS segment is extremely well positioned once we sort of get out of this early cycle environment. Is that the right way to think about it that the secular trends in the Utility space are probably the most favorable of any of your segments right now? John Engel: The first part of your stake, absolutely, yes. I think that, as you characterized it, Dave, the secular growth trends are strong. And as robust as I've seen, this is – I know that a strong statement in my tenure at WESCO. Again, it's two sets of secular growth trends. Everything around utilities, as you outlined, which is the UBS and everything around broadband build out 5G acceleration, which is the B of UBS, so to speak. In terms of it being the strongest, I would say that what CSS faces in terms of – and it can take advantage of in terms of global secular growth trends is also right up there in terms of data center growth, the demand for bandwidth. I mean, I – if anything, we've seen one result from this COVID-driven environment, it's going to be an acceleration of all things digital, right? And remote connectivity and ensuring that voice, data, video, all that convergence on all applications and the – I think we're at the very beginning part of the S-curve of IoT-based applications, very beginning. That's got multiple decades of growth in front of us. So I mean, just on the second comment you made, I'd say that the secular growth trends that CSS are facing are very attractive to us and also are robust. And finally, and this one will take a bit longer and be more, I'll call it, more consistent over the next few decades. I think we're at the beginning part of an accelerating electrification trend. And EES will benefit greatly, but that affects our other business units as well. And so I mean it's hard for me to say UBS has got the strongest growth trends. We've spent some time outlining all the various growth trends. We think we're well positioned to take advantage of. But I would say those – that's how I would it. Utility, yes, on your utility comment, yes, on your broadband comment, that I will put datacom and IP security right up there with it in electrification as well. Operator: Our next question will come from Chris Dankert with Longbow Research. Chris Dankert: Congrats again on the quarter here. I guess I want to make sure I got my numbers straight based on Dave, what you were saying, synergy savings stepped up pretty materially into the second quarter. The number I'm coming at to is $68 million. Is that correct? Is that what you're intending to guide to here on 2Q? Dave Schulz: That would be high. And so if you think about – we called out $34 million in Q1. And we called out the – for the full amount. So we have said that 60%, 40% split on synergy realization, front half, back half. So we've not provided a specific number for Q2, but your number is too high. Chris Dankert: Got it. Got it. And then just housekeeping, and sorry if I missed it, but any comment on your April growth to date or just kind of how growth trended through the first quarter into 2Q here? John Engel: Yes. And we've been very pleased with the momentum as we – again, preliminary basis, our April sales up roughly 20% versus the prior year pro forma. And obviously, April and the prior year was the first full month that we had a true COVID impact. Now we saw the decline in our sales rates in the middle of March, April, we were down on a pro forma basis, 16%. So we've come off the trough from the prior year. And we also commented that the gross margins are in line with Q1. Operator: And this does conclude our question-and-answer session. I'd like to turn the conference back over to John Engel for any closing remarks. John Engel: Well, thank you all very much. As we said, we're off to a great start, and we do appreciate your support, and we look forward to following up with you. And I know we've already got a long list of calls, Leslie and Will and Dave, and we'll be connecting with you. So thank you. Please stay safe and healthy, and have a great day. Operator: The conference is now concluded. Thank you for attending today’s presentation, you may now disconnect your lines at this time.WCC Ratings Summary
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WESCO Shares Up 12% Since Q4 Beat Announcement
WESCO Int'l (NYSE:WCC) shares rose more than 12% since the company’s reported Q4 results on Tuesday, with EPS of $4.13, coming in better than the Street estimate of $3.79. Revenue was $5.6 billion, beating the Street estimate of $5.37 billion.
Backlog remains strong, up 44% year-over-year, with real Q4 revenue upside, including supply chain easing and incremental backlog execution (notably at CSS).
The company expects 2023 EPS in the range of $16.80–18.30 (vs. Street’s $16.94 estimate) on sales growth of 6–9%. The company remains committed to a $1 billion share repurchase through 2026, with activity picking up in the second half of 2023.
WESCO Shares Up 12% Since Q4 Beat Announcement
WESCO Int'l (NYSE:WCC) shares rose more than 12% since the company’s reported Q4 results on Tuesday, with EPS of $4.13, coming in better than the Street estimate of $3.79. Revenue was $5.6 billion, beating the Street estimate of $5.37 billion.
Backlog remains strong, up 44% year-over-year, with real Q4 revenue upside, including supply chain easing and incremental backlog execution (notably at CSS).
The company expects 2023 EPS in the range of $16.80–18.30 (vs. Street’s $16.94 estimate) on sales growth of 6–9%. The company remains committed to a $1 billion share repurchase through 2026, with activity picking up in the second half of 2023.
WESCO Shares Up 12% Since Q4 Beat Announcement
WESCO Int'l (NYSE:WCC) shares rose more than 12% since the company’s reported Q4 results on Tuesday, with EPS of $4.13, coming in better than the Street estimate of $3.79. Revenue was $5.6 billion, beating the Street estimate of $5.37 billion.
Backlog remains strong, up 44% year-over-year, with real Q4 revenue upside, including supply chain easing and incremental backlog execution (notably at CSS).
The company expects 2023 EPS in the range of $16.80–18.30 (vs. Street’s $16.94 estimate) on sales growth of 6–9%. The company remains committed to a $1 billion share repurchase through 2026, with activity picking up in the second half of 2023.
Key Takeaways From WESCO International’s Management Meeting
Analyst at Oppenheimer provided their key takeaways from WESCO International, Inc.’s (NYSE:WCC) management meeting, which was focused on the overall post-merger extensibility of scale benefits in distribution and digital/IT investment to drive margin and growth momentum into markets with secular drivers.
According to the analysts, digital investment remains a deal case centerpiece, with post-merger economies of scale enabling affordability ($120 million/year capex and opex investment in PP&E and IT vs. $90 million pre-merger pro forma).
The company's IT architecture includes best-fit vended products for each of front/middle/back-end solutions, with proprietary integration to establish tools and systems for a vast data pool tying information about suppliers, product inventory, and customer consumption to drive differentiated analytics and enable nonlinear benefits of scale.
WESCO International Review Ahead of Investor Day
RBC Capital analysts provided their views on WESCO International, Inc. (NYSE:WCC) ahead of the upcoming Investor Day on September 7.
The analysts expect the overarching theme to be how the company still has ample sparks for growth, including more self-help/revenue synergies from its successful Anixter integration, as well as an array of longer-term secular growth themes, such as the electrification of everything, grid hardening, infrastructure spending, automation, and EV charging.
The analysts expect the company to reiterate its 2022 guidance from Q2/22 earnings, which includes total sales growth of 16%-18%, adjusted EBITDA margins of 7.8%-8.0%, and adjusted EPS of $15.60-$16.40, compared to the Street estimate of $16.07.
While the analysts believe there is still an upside to both the sales and cost synergy targets from the Anixter acquisition, they mentioned that the company is more likely to emphasize revenue synergies.
WESCO International Review Ahead of Investor Day
RBC Capital analysts provided their views on WESCO International, Inc. (NYSE:WCC) ahead of the upcoming Investor Day on September 7.
The analysts expect the overarching theme to be how the company still has ample sparks for growth, including more self-help/revenue synergies from its successful Anixter integration, as well as an array of longer-term secular growth themes, such as the electrification of everything, grid hardening, infrastructure spending, automation, and EV charging.
The analysts expect the company to reiterate its 2022 guidance from Q2/22 earnings, which includes total sales growth of 16%-18%, adjusted EBITDA margins of 7.8%-8.0%, and adjusted EPS of $15.60-$16.40, compared to the Street estimate of $16.07.
While the analysts believe there is still an upside to both the sales and cost synergy targets from the Anixter acquisition, they mentioned that the company is more likely to emphasize revenue synergies.
WESCO International Reports Strong Q4 Beat
WESCO International, Inc. (NYSE:WCC) reported its Q4 results, which came ahead of the Street estimates, driven by upside sales and margin strength. Q4 EPS came in at $3.17, compared to the consensus estimate of $2.52. Revenue was $4.9 billion, above the consensus estimate of $4.66 billion.
Analysts at RBC Capital believe the bull case in the company continues to track well, paced by the impressive beat, upside 2022 guidance, and another round of boosts to the revenue and cost synergy targets in the successful Anixter integration.
According to the analysts, deleveraging continues to be ahead of plan, and at 3.9x, the company is now below the psychological 4x threshold, on its way to its targeted 2.0x-3.5x in the second half of the year.
The sector trends continue to be in the company’s favor, including electrification, automation/IoT, grid modernization, and 24/7 connectivity. The analysts see ample upside from here, with valuation compellingly below its historical relative P/E support level. They raised the price target on the company’s shares to $163 from $158, while reiterating their outperform rating.
