Wesco Sells Datacom Business In Canada; Street Says Buy

Wesco International on Feb. 12 announced the sale of its Canada Datacom business to Guillevin International, a Canadian distributor of industrial products. Terms of the deal weren’t disclosed. Shares closed almost 4.7% higher on Friday.

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The divestiture by the multinational electrical distribution and services company is part of an agreement with the Canadian Competition Bureau. The agreement relates to the company’s merger with Anixter International, which closed in June, last year.

Per the terms of the agreement, Wesco (WCC) committed to divest its legacy Canadian utility and datacom businesses. Net proceeds of the deals are likely to be used to repay indebtedness.

Wesco CEO John Engel said, “We are pleased to complete this transaction and to satisfy the last divestiture requirement of our agreement with the Canadian Competition Bureau. This transaction is a highly successful outcome for WESCO. We will support our associates as they transition to Guillevin, and we wish them continued success. WESCO is committed to continuing to serve datacom customers in Canada, through the legacy business we acquired with Anixter.”

Earlier this month, the company also sold its utility business in Canada to Rexel Canada, a subsidiary of France’s Rexel Group. (See Wesco stock analysis on TipRanks)

Last week, the company reported 4Q and FY20 results. Wesco’s 4Q adjusted earnings decreased 7.6% to $1.22 per share on a year-over-year basis and missed the Street estimates of $1.33 per share. Net revenues grew 96.7% to $4.1 billion compared with analysts’ expectations of $4.12 billion.

On Feb. 10, Oppenheimer analyst Christopher Glynn increased the stock’s price target to $90 (12% upside potential) from $88 while maintaining a Buy rating.

“While 2021 represents a transitional year of sorts (interplay cost add-backs vs. synergies), WCC notes high internal confidence in exceeding the 2021 outlook for sales, synergies, OM; also sets table for strong 2022 OM progress,” Glynn wrote in a note to investors.

Wesco shares have exploded 85.3% in the past six months, while the stock still scores a Strong Buy consensus rating based on 6 unanimous Buys. That’s alongside an average analyst price target of $94.50, which implies around 17.5% upside potential over the next 12 months.