WESCO (WCC)

Electrical supply company WESCO (NYSE:WCC) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 12.9% year on year to $6.20 billion. Its non-GAAP profit of $3.92 per share was 2.3% above analysts’ consensus estimates.

Company Overview

Based in Pittsburgh, WESCO (NYSE:WCC) provides electrical, industrial, and communications products and augments them with services such as supply chain management.

Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Maintenance and repair distributors that boast reliable selection and quickly deliver products to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is still a real threat, forcing investment in omnichannel capabilities to serve customers everywhere. Additionally, maintenance and repair distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.

Competitors in the industrial distribution and supply chain solutions industry include Graybar Electric (NYSE:GRAY), Anixter (NASDAQ:AXE), and HD Supply (NASDAQ:HDS).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, WESCO’s sales grew at an incredible 17.4% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. WESCO’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1% over the last two years was well below its five-year trend.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, WESCO’s organic revenue averaged 2.5% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, WESCO reported year-on-year revenue growth of 12.9%, and its $6.20 billion of revenue exceeded Wall Street’s estimates by 4.9%.

Looking ahead, sell-side analysts expect revenue to grow 4.2% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

WESCO has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 21.3% gross margin over the last five years. Said differently, WESCO had to pay a chunky $78.67 to its suppliers for every $100 in revenue.

This quarter, WESCO’s gross profit margin was 21.3%, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

WESCO was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.6% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, WESCO’s operating margin rose by 1.4 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, WESCO generated an operating margin profit margin of 5.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

WESCO’s EPS grew at an astounding 19.4% compounded annual growth rate over the last five years, higher than its 17.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into WESCO’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, WESCO’s operating margin was flat this quarter but expanded by 1.4 percentage points over the last five years. On top of that, its share count shrank by 2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For WESCO, its two-year annual EPS declines of 11.2% mark a reversal from its (seemingly) healthy five-year trend. We hope WESCO can return to earnings growth in the future.

In Q3, WESCO reported adjusted EPS of $3.92, up from $3.58 in the same quarter last year. This print beat analysts’ estimates by 2.3%. Over the next 12 months, Wall Street expects WESCO’s full-year EPS of $12.68 to grow 24.9%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

WESCO has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.6%, lousy for an industrials business.

WESCO burned through $95.9 million of cash in Q3, equivalent to a negative 1.5% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

WESCO’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.4%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, WESCO’s ROIC averaged 1.2 percentage point increases over the last few years. This is a good sign, and we hope the company can keep improving.

WESCO reported $571.9 million of cash and $5.75 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.50 billion of EBITDA over the last 12 months, we view WESCO’s 3.5× net-debt-to-EBITDA ratio as safe. We also see its $165.3 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly WESCO blew past analysts’ organic revenue expectations this quarter. We were also excited its revenue and EPS outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 2.1% to $233 immediately following the results.

Updated: December 3, 2025 at 9:10 PM EST

Are you wondering whether to buy WESCO or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

WESCO isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its low free cash flow margins give it little breathing room. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its organic revenue growth has disappointed.

WESCO’s P/E ratio based on the next 12 months is 16.9x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $286.17 on the company (compared to the current share price of $270.57).