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Anixter International: Slow Core Growth and Incremental Headwinds Weigh on Earnings Outlook


AXEShares traded down 1% as Anixter (NYSE:AXE) reported a disappointing fourth-quarter result and 2015 guidance did not convey a strong year of growth ahead. Although management pointed to positives such as improved security performance, accelerating project activity in wire and cable (excluding oil and gas), and new fastener customers ramping up, Anixter faces several headwinds in the year ahead. Lower copper and a stronger dollar will weigh on results, Europe remains difficult, and oil and gas is an unknown.

Management provided a framework for 2015. Organic volume growth of 3%-5% is expected to be partly offset by a $90 million-$100 million (1.5%) headwind from foreign currency and $75 million-$80 million (1.2%) headwind from copper. The TriEd acquisition will add about $450 million of sales for each of the first three quarters. By geography, emerging markets are expected to improve in ECS and fasteners, with wire and cable slowing in North America. All other segments are stable. On the operating profit line, there are several headwinds: 1) pension expense of $8 million ($0.15 per share), 2) currency of $8 million-$10 million ($0.19 per share), and 3) copper of $18 million-$22 million ($0.40 per share). Adjusted EBITDA leverage is expected to be in the mid- to high single digits.

Shares of Anixter closed today at $76.03. AXE has a 1-year high of $115.84 and a 1-year low of $74.10. The stock’s 50-day moving average is $182.63 and its 200-day moving average is $85.47.

 

Anixter International Inc., together with its subsidiaries, distributes enterprise cabling and security solutions, electrical and electronic wire and cable products, original equipment manufacturer (OEM) supply fasteners, and other small parts.