IBD 50 Stocks To Watch: Industrial Stock Holds Firm During Market Turmoil

While the stock market was going through its worst week since late February, shares of Wesco International (WCC) hardly flinched. In fact they rose, which is why the company is today’s pick for IBD 50 Stocks To Watch.


Wesco provides supply chain services for industrial customers and is a major supplier to thousands of companies in communications, security, electrical, electronic, utility and broadband markets. It’s one of the leading industrial stocks.

Once a division of Westinghouse Electric, the company’s earnings performance was a slog for much of 2020. EPS fell each quarter and rose only 9% in the 2020 third quarter, according to MarketSmith.

The industrial stock’s earnings picked up steam in the first and second quarters of this year. EPS rose 56% then 98%. The sales performance started turning around earlier. Sales went from a 3% decline in Q2 of 2020 to meaty gains of 93%, 97%, 105% and 120%.

Industrial Stock’s Sales Booming

What caused the turnaround?

In the August earnings report, CEO John Engel said the company’s sales and margin momentum grew in each of its business divisions thanks to the continuing economic recovery, the company’s increased scale and a shift toward more higher-growth markets.

Its acquisition of Anixter, completed last year, is being integrated faster than expected, Engel said.

Wesco raised its full-year outlook for the second time this year. It forecast sales to climb 10% to 13%, and adjusted EPS of $8.40 to $8.80.

Analysts expect Wesco’s 2021 EPS to grow 71% to $8.80. Analyst also estimate third-quarter earnings of $2.54 a share, an increase of 53%. Sales are expected to climb 13% to $4.68 billion, according to FactSet.

The industrial stock broke out of a cup base Aug. 5, but never climbed more than 6% above the 113.20 buy point. The stock pulled back to the buy point in September, which coincided with a test of the 10-week moving average. Shares found support at that level.

The support offers a secondary buy area. Wesco also is forming a flat base with a 121.29 buy point. While the chart looks attractive, keep in mind that the stock market is in a correction. Buying any stocks is quite risky right now. Instead, consider watching how Wesco progresses. If the stock market goes back to an uptrend, it may still be in a buy zone by then.

Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia


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