Rexel Outperforming, With More Still To Come

 

On balance, 2021 was a good year for France’s Rexel S.A. (OTCPK:RXEEY) (OTCPK:RXLSF). I didn’t see quite as much volume growth in the U.S. as I wanted, but the company did gain share in a sluggish commercial market and is still waiting for large industrial projects to move forward. Execution in Europe remains strong, however, and the company is well-leveraged to ongoing investment in electrification and renovation – drivers that I think will accelerate after Russia’s invasion of Ukraine.

The Europe-listed shares (the ones I own) are up almost 30% since my last update, lagging WESCO (WCC), but outperforming the broader industrial space and other distributors like Grainger (GWW) and Fastenal (FAST), as well as suppliers like Eaton (ETN) and Schneider (OTCPK:SBGSY). The performance of the U.S. ADRs has been less robust, but still a little better than most comps.

Given the potential for future share gains in the U.S., growth in large projects, and electrification and renovation in both North America and the EU, I’m still bullish on these shares. Long-term revenue growth of less than 4% and high-single-digit FCF growth can support a double-digit annualized total return from here, though I would like to see better volumes in the coming quarters.

 

To continue reading, click the link: 

Rexel Outperforming, With More Still To Come

Rexel: Still An Attractive Way To Get Long On Automation, Complexity, And Green Retrofits

The world is getting more complex, and that plays into Rexel’s (OTCPK:RXEEY) (RXL.PA) strengths as an electrical distribution specialist. Whether it's more advanced electrical infrastructure needed to support factory and warehouse automation or commercial building controls and green retrofits, Rexel is leveraged to these growth trends, as well as share gains in a fragmented U.S. market and overall efficiency gains from its digital strategy.

These shares have risen almost 60% since the time of my last update, handily outperforming not only the broader industrial sector, but also suppliers like ABB (ABB), Eaton (ETN), and Schneider (OTCPK:SBGSY). I believe better days lie ahead as Rexel leverages economic recoveries in North America and Western Europe, ongoing automation installations, upcoming green building retrofits, and internal digital efficiency efforts. With Rexel likely to leverage low single-digit revenue growth into mid-single-digit FCF growth, I believe these shares still over double-digit long-term annualized appreciation potential and nearer-term upside into the mid-$20s.

Read the full article here: 

Rexel: Still An Attractive Way To Get Long On Automation, Complexity, And Green Retrofits

COVID-19 Worries Overshadowing Real Progress At Rexel

Rexel (OTCPK:RXEEY) (RXL.PA) is far from the only company to have sold off recently on renewed fears of what a resurgence in COVID-19 cases in Europe (and ongoing growth in the U.S.) will mean for the expected economic recovery. Still, with better than expected results and significant potential from both internal transformation (digital efforts namely) and external drivers like onshoring, automation, and green retrofits, I believe the recent pullback has created a more attractive opportunity in the shares.

Distribution is a difficult business, and investors should never expect Rexel to produce the sort of margins that its suppliers (ABB (ABB), Eaton (ETN), et al) do, but I believe the efforts underway here will lead to consistent FCF margins in the 3%’s and EBITDA margins moving towards the high single digits over the next five years. That, in turn, supports a low-to-mid-teens total annualized return from current levels, making this a pretty attractive option in my view.

Rexel’s ADRs are not particularly liquid, and that may be an issue for some investors, though buying the local shares is an option with many brokers these days.

 

Click here to continue: 

 COVID-19 Worries Overshadowing Real Progress At Rexel

Rexel Shares Can Power Up Even Further On Green Retrofits And Automation-Driven Demand

Time will tell what actually happens in the real world, but the plans under consideration for significant commercial building renovations in North America and Europe, as well as reshoring and automation adoption, add potential growth drivers to a story at Rexel (OTCPK:RXEEY) (RXL.PA) that I’d already thought was under-appreciated by market. Add in potential efficiency gains from digitalization and share gains in North America, and there’s still a good bull story to tell here.

Rexel shares have done well since my last update, with the ADRs up about 75% and the local shares up closer to 35%. I still see appreciation potential in the low double-digits on a long-term annualized total return basis, and although Rexel has certainly recovered from the worst of the COVID-19 panic, I don’t believe the shares yet reflect the true potential of the business.

 

Read more here: 

Rexel Shares Can Power Up Even Further On Green Retrofits And Automation-Driven Demand

Rexel Pounded On Fears Of Protracted Construction Declines

Where I had previously expected Rexel (OTCPK:RXEEY) (RXL.PA) to face a slowing non-residential construction market in 2020 and a bottoming industrial market, those assumption are out the window with Covid-19 leading to drastic slowdowns in activity around the world. With fears of much worse near-term revenue and margin prospects, a longer-term downturn in commercial activity, and a liquidity squeeze, Rexel shares have lost more than 40% of their value from my last update in December.

Current conditions are indeed bleak, and I am concerned about the prospect of an extended decline in non-residential new-build activity, but I see industrial automation spending returning late in 2020 and into 2021, and I believe renovation/retrofit activity can support the non-resi business to some extent. On top of that Rexel still has its own self-improvement initiatives, like the increasing digitalization of its business. If low single-digit revenue growth and long-term FCF margins in the 3%’s are still attainable, these shares are more than 50% undervalued now.

Investors considering this name should note that the U.S. ADRs are not especially liquid.

Read the full article:
Rexel Pounded On Fears Of Protracted Construction Declines

Rexel Transitioning From "Repair" To Growth

Although Rexel (OTCPK:RXEEY) (RXL.PA) has a decent enough trailing 12-month return (about 20%), the shares have ended up basically flat since my last update on this large electrical distributor, as internal progress with a variety of turnaround efforts has been offset by end-market deterioration. While management believes they’ve exited the “repair phase” of the turnaround, and I see meaningful growth opportunities in markets like the U.S., the reality is that macro indicators are still mixed, and the company is still investing in expanding its digital capabilities.

I still believe that Rexel shares are undervalued and that this stock can benefit from some company-specific drivers in 2020 that is looking pretty “meh” for most industrials. I believe the shares are more than 20% undervalued if Rexel can deliver low single-digit revenue growth and high single-digit FCF growth, but I must also note that the ADRs are illiquid and not all readers may wish to go to the trouble of buying the local shares.

Read the full article here:
Rexel Transitioning From "Repair" To Growth

Rexel Finally Getting Some Love

It has been a little lonely at times being a Rexel (OTCPK:RXEEY) [RXL.PA] bull, and not just because this is an almost-unknown name to U.S. investors (and the U.S. ADRs have very low day-to-day liquidity). Although the company has been making meaningful progress in restructuring its go-to-market effort (becoming more multi-channel and digital-friendly and meeting the customer on the customer's terms) and repositioning its U.S. business, the quarter-to-quarter financial results haven't always showed unequivocal progress.

I still believe there's more upside to be gained from Rexel's restructuring efforts, growth in commercial and industrial electrical installations, and some recovery in ABB's (ABB) GEIS business (a major supplier, particularly in the U.S.). I've trimmed back my estimates on an abundance of caution (maybe an overabundance) due to weakening European PMI numbers, but I still see double-digit upside on the back of low single-digit long-term revenue growth.

Read more here:
Rexel Finally Getting Some Love

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.

Continue here:
Rexel Delivering On Its Turnaround, But Getting No Credit

Rexel SA Showing A Little More Juice In Its Turnaround

It has been frustrating waiting for Rexel (OTCPK:RXEEY) (RXL.PA) to deliver on its turnaround potential, and the shares had been steadily sliding lower this year until strong second quarter results reversed the trend. Now it seems that the company’s major suppliers are seeing better trends in electrification and automation, and the company’s own plans to improve performance in the U.S. and Europe seems to be paying off a little better. With healthy trends in non-residential construction in Europe and the U.S. and signs of margin leverage, there should be more upside for Rexel from here.

Continue here:
Rexel SA Showing A Little More Juice In Its Turnaround

Margin Challenges And Growing Cyclical Worries Have Dimmed Rexel

The performance of industrial distributor stocks on a year-to-date basis really covers the map. Grainger (GWW) has been performing exceptionally well, Ferguson (OTCQX:FERGY) has done alright, HD Supply (HDS) is more or less flat, but the electrical distributors Wesco (WCC) and Rexel (OTCPK:RXEEY) are each down about 15%. Although some of Rexel’s trouble can be attributed to frustration and disappointment in the pace of margin improvement, I also believe growing worries about the industrial cycle are playing a role.

I like the value in Rexel shares, but there are risks with both execution and macro factors – it is tough to hold a good/improving company when investors are selling out of the sector. I’m bullish on the prospects for construction in Europe and ongoing improvements in the U.S. business, but if discrete manufacturing is slowing down, it will be harder for management to hit its margin improvement targets.

Read more here:
Margin Challenges And Growing Cyclical Worries Have Dimmed Rexel

Rexel Plugged Into Improving Trends

Distribution is a tough business, and Amazon's (AMZN) entry into industrial distribution has not made life any easier for companies like Grainger (GWW), Fastenal (FAST), Rexel (OTCPK:RXEEY), or WESCO (WCC). Even so, I think there's a worthwhile opportunity in Rexel today, as the market seems to be overestimating the threat from Amazon, and underestimating the benefits to be had from an improving construction market in Europe, self-directed internal improvements, and the benefits to be had from further consolidation.

I don't expect torrid revenue growth from Rexel, but I do expect some growth and improving margins to drive more compelling FCF growth, as new management responds to an activist investor's involvement with far-ranging self-improvement initiatives. With around 20% to 25% upside from here, Rexel looks well worth considering.

Rexel's ADRs are not liquid, and that is a shame. Investors can nevertheless look to the Paris-listed shares (RXL.PA) which have far more liquidity and which are available through many larger brokerages.

Follow this link for the full article:
Rexel Plugged Into Improving Trends

WESCO's Whipsaw Seems To Have Over-Corrected

When I last wrote about WESCO (NYSE:WCC) in January of this year, I thought the Street was too negative on the shares. I was concerned about the prospect for lingering weakness in the Industrial and Construction sectors, as well as the likelihood of gross margin leverage, but I thought the gap between the share price in the mid-$30's and my fair value in the low $50's was too wide.

I didn't expect that the shares were going to shoot up more than 70% in the interim, but that's what has happened - despite the fact that the company's earnings haven't been that much better than expected. Then again, January of this year was at or near a point of peak pessimism in the market and it seems as though a lot of investors are back to thinking that WESCO is somehow going to deliver on pretty aggressive guidance for the next three to four years.

I'm not so bullish, although I have nudged my revenue estimates up a little bit, and my fair value as well. I believe distributors like WESCO, Rexel (OTCPK:RXEEY), HD Supply (NASDAQ:HDS), Grainger (NYSE:GWW) and so on are going to have a much harder time achieving gross margin leverage in the years to come, and I don't know that that's really reflected in expectations.

Although I do think WESCO has some strong competitive attributes, including a well-tested M&A strategy and a strong service component, I'd be cautious expecting large-scale changes from a company whose financials have been pretty consistent for many years now.

Continue here:
WESCO's Whipsaw Seems To Have Over-Corrected

Seeking Alpha: HD Supply Outgrowing Its Markets At An Accelerating Rate

I liked HD Supply (NASDAQ:HDS) as a play on recovering construction and infrastructure markets back in March, but I wasn't expecting a nearly 25% move in the shares over the next six months. This was not just a "rising tide lifts all boats" sort of move either - industrial distributor MSC Industrial (NYSE:MSM) and electrical distributor WESCO (NYSE:WCC) are both up over that period as well, but only by about 3% and 5%, while Rexel (OTCPK:RXEEY), Wolseley (OTCQX:WOSYY), and Fastenal (NASDAQ:FAST) are in the red over that stretch. What has helped HD Supply greatly is that management is delivering on its guidance and establishing credibility with its plans to outgrow its underlying markets by a meaningful amount over the next few years.

I still believe that HD Supply is more of a momentum play than a value story. Even with expectations of a construction/infrastructure recovery and internal growth initiatives supporting double-digit growth over the next five years and long-term sales growth of 8%, I can't really get to an attractive discounted cash flow number. I don't expect that to matter much, though, so long as the company can continue to deliver above-market growth and ongoing margin leverage.

Read the full article here:
HD Supply Outgrowing Its Markets At An Accelerating Rate

Seeking Alpha: WESCO Offers Another Way To Play Familiar Themes

I was lukewarm to positive on WESCO (WCC) six months ago (you can read that article here), and the stock has more or less matched the S&P 500 in the time since, rising about 10%. That's not too bad, particularly as two of the company's largest markets, industrial and construction, have yet to really rebound all that much. HD Supply (HDS) offers a lot of the same underlying exposures and market leverage, with an operational improvement kicker, but WESCO may hold more appeal for investors less inclined to gamble on an internal improvement story.

Follow this link for more:
WESCO Offers Another Way To Play Familiar Themes

Seeking Alpha: HD Supply Seeing A Turn In Non-Residential Construction

It may yet be early for all-clear on HD Supply (HDS), as "green shoots" could easily get trampled, but the company does seem to have its guidance dialed in better and underlying results are looking better. There's still some comp-group noise that has me questioning the sell-side's apparent love for this stock, but the valuation and opportunity seem in reasonable alignment these days.

Go here for the full piece:
HD Supply Seeing A Turn In Non-Residential Construction

Investopedia: A Siemens Shopping List

Following its rivals ABB (NYSE:ABB) and General Electric (NYSE:GE), it looks like Siemens (NYSE:SI) is preparing to pull out its wallet and try a little more growth-by-acquisition. In an interview with the Financial Times, the conglomerate's CFO Joe Kaeser said that the company had reached a point of "management maturity" and was looking to do deals in the power network and/or plant automation markets worth potentially billions of dollars.  

This is an interesting move for this management team. CEO Peter Loescher has earned high marks for cleaning up and transforming this company and putting it back on a credible growth path. What makes this decision a little more surprising is that a lot of the mess that Mr. Loescher had to clean up was a byproduct of a long series of questionable deals that never really delivered on their price or promise. Perhaps, then, Siemens is tempting fate. Or perhaps a good CEO is a good CEO and Mr. Loescher can successfully integrate deals where his predecessors could not, making M&A a sound use of Siemens' prodigious cash resources.

 
Who's on the Menu? 
At this point, all that Siemens has really declared is that they want to spend billions of dollars in the automation and power markets. Accordingly, that opens a wide range of possibilities for investors to consider. Right off the top, though, investors should forget about ABB, GE or Honeywell (NYSE:HON). The first two vastly exceed Siemens' budget and antitrust officials would go berserk. Likewise, Schneider Electric (Nasdaq:SBGSY) seems too large despite some clear synergies. As for Honeywell, that would seem to involve Siemens moving into too many new and unrelated markets to justify the synergies that may there in areas like automation and power.


Please click below for the full piece:
http://stocks.investopedia.com/stock-analysis/2011/A-Siemens-Shopping-List-ABB-GE-SI-ETN-EMR-ROK-HON0217.aspx