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Thursday, Mar 28, 2024

Wesco 2020 Plan En Route to Higher Revenues

Wesco Aircraft Holdings Inc. continues to improve its financial performance, according to Chief Executive Todd Renehan. And while the Valencia aerospace parts and supply chain company has a lot of work ahead of it, he was pleased with its progress during the first quarter. Wesco reported on May 2 adjusted net income of $23.2 million (23 cents a share) for the fiscal second quarter ending March 31, compared to adjusted net income of $22.2 million (22 cents) in the same period a year earlier. Revenue increased 9 percent to nearly $427 million. Shares closed May 8 at $10.02. In a statement in conjunction with the quarterly results, Renehan said that cost savings associated with the Wesco 2020 plan offset investments to support growth. “We believe fiscal 2019 will be a year of heavy investment and that the temporary costs associated with Wesco 2020 execution will decline significantly by the end of the year,” Renehan said in the statement. The Wesco 2020 plan, announced a year ago, will enhance service and reduce costs by aligning the company’s footprint with its customer and supply base; refine the organizational structure to drive greater accountability, reduce management layers and eliminate duplication; and invest in automation and business tools for more effective inventory management. In a research note released after the quarterly results, Michael Ciarmoli, an analyst with SunTrust Robinson Humphrey, called Wesco one of the “800-pound gorillas” in the aerospace parts distribution industry. The company’s operations improvements cause him to believe that its financial metrics will continue to improve. “Although risks are present in the commercial aerospace cycle, we think the company’s upstart commercial aerospace aftermarket (maintenance, repair and overhaul) business coupled with an improving military spending environment will act as potential offsets,” Ciarmoli said in the note. “Specifically, within the military market we believe the new administration’s desire to increase military spending could be beneficial to (Wesco’s) broader portfolio of third-party logistics management solutions.” However, Ciarmoli identified the company’s efforts in Europe, Middle East and Africa as the one blemish on the quarter, although he conceded that management said it was taking corrective actions that will focus on two areas. The first was improving win rates for sales efficiency, management procedures and sales pipeline management. “Second, on supply chain management, which will take longer to implement, the goal is to reduce backlog tied up with suppliers while also looking to improve long-term contract agreements,” Ciarmoli said in the note. Ciarmoli gave Wesco a “buy” rating with a price target of $13.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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