Rexel Delivering On Its Turnaround, But Getting No Credit

In closing my last article on Rexel (OTCPK:RXEEY) (RXLSF), I commented that “turnarounds can test investor patience”, and that has certainly been true for this global electrical products distributor. The market hasn’t been too keen on many stocks in the distribution space since that last article, with stocks like Grainger (GWW) and Ferguson (OTCQX:FERGY) losing ground, but Rexel has done substantially worse, and likewise lagged the shares of electrical products companies like Eaton (ETN), Schneider (OTCPK:SBGSY), Legrand (OTCPK:LGRDY), Hubbell (HUBB).

I can understand investor concerns about slowing macro, as I too expect construction spending to slow in the EU and U.S. in 2019, and I can likewise understand concerns that Amazon’s (AMZN) efforts in the space will lead to lower margins over the long term. Still, those issues seem more than amply reflected in the share price, and I don’t think the valuation reflects the progress made in 2019, nor the benefits yet to be seen from exiting underperforming businesses and restructuring toward higher-value products.

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Rexel Delivering On Its Turnaround, But Getting No Credit