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
No comments:
Post a Comment