Wesco Tightens up 2022 Sales and Margin Guidance, While Lowering its Free Cash Flow Expectations

Wesco reported mixed third-quarter results, but that didn’t deter us from increasing our fair value estimate slightly to $182 from $181 (largely due to the time value of money). The company’s shares traded down significantly intraday (down 15%). We believe this was mainly due to the company’s free cash flow update. The key metric continued to trend negatively in the quarter (down $421 million year-to-date), as result of increased working capital. Accounts receivable and inventory came in at elevated levels due to high sales growth year-to-date. Wesco has increased inventory levels considerably to maintain service levels and support its growing backlog.