WESCO International Inc.

Overview Key strengths Key risks Leading position in electrical distribution market in the U.S. and Canada. Fragmented and competitive served market. Good diversity across utility, communication, construction, industrial, and manufacturing end markets. Half of revenue driven by cyclical projects and investments, which would likely decrease during a recession. Counter-cyclical cash flow generation. Risk of large acquisitions elevating leverage. In 2024, the company lowered its public leverage target to debt to EBITDA of 1.5x-2.5x from 2x-3.5x. Though we forecast S&P Global Ratings-adjusted debt to EBITDA will fall below 3x in 2026, we view continued deleveraging as providing financial flexibility primarily to fund acquisitions and shareholder returns as a secondary consideration. We continue to believe WESCO could make a large acquisition, similar

...WESCO International Inc.'s financial policy continues to support our rating. In 2024, the company lowered its public leverage target to debt to EBITDA of 1.5x-2.5x from 2x-3.5x. Though we forecast S&P Global Ratings-adjusted debt to EBITDA will fall below 3x in 2026, we view continued deleveraging as providing financial flexibility primarily to fund acquisitions and shareholder returns as a secondary consideration. We continue to believe WESCO could make a large acquisition, similar to that of Anixter Inc. in 2020. A deal of this size could easily raise adjusted debt to EBITDA to 4x-5x. While the likelihood of such a transaction is highly uncertain, to raise our rating, we would need to believe that the company will maintain adjusted leverage well below 4x on a sustained basis, including shareholder rewards and acquisitions....

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