Friday, May 8, 2015

Seeking Alpha: Margin Leverage Limiting WESCO's Potential

None of the major industrial distributors have been doing especially well of late (other than HD Supply (NASDAQ:HDS)), but WESCO (NYSE:WCC) has had a rough time of it as industrial spending has weakened and the company has struggled to generate meaningful margin leverage. WESCO's steady-eddy performance is one of its strong points during the tough times, but the company's going to be hard-pressed to generate substantial margin upside without some underlying inflation as rivals compete hard for business and customers push back on pricing.

I like WESCO as a company, but I think management has a tough challenge in front of them - very lean SG&A spending doesn't leave much room for meaningful cost-cutting, pricing power limits the gross margin potential that I see, and breaking out of the company's long-term average revenue growth rate range in the mid-single digits may well require M&A at the cost of risk and leverage.

Read more here:
Margin Leverage Limiting WESCO's Potential

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