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Wesco Expansion Continues to Impress

What's more, this deal is expected to be accretive to Wesco's earnings. Management sees LaPrairie possibly adding as much as 3 cents per share in profits within the first year. The other thing is, given that management has already done so well weathering the weakness in North America industrial market, this deal -- coupled with the improved macro environment -- does nothing but add pressure on them to do more.

That's the only potential drawback that I see. I don't necessarily have a problem with that. This is not a team of rookies. I believe they're up to the challenge. The only question is how soon they can deliver on the potential. These shares are not exactly cheap. They've inched up steadily since the October quarter, during which both earnings and revenue were up 17% year over year.

Thursday, the company will look to duplicate that performance when it reports fourth-quarter and full-year results. The Street will be looking for earnings-per-share of $1.32 on revenue of $1.91 billion, which would represent year-over-year revenue growth of 16%. Given the rate at which Wesco has done deals, I believe the organic growth metric will be what the Street will hone in on.

To that end, this is where the company's recent performances -- strong as they have been -- may actually come back to hurt management. Again, there's no longer the strain of weak North American growth to appease investors. If expectations fall short from an organic growth perspective (say, less than 5%), the stock is certain to follow. But I don't expect that to happen given the progress in the construction and utility markets. How the company does on margin will likewise not be ignored.

All of that said, I won't fault investors that want to take a cautious approach purely from a valuation perspective. I can't argue that these shares are cheap when hovering near 52-week highs. The thing to remember, though, is that Wesco's trailing P/E is still 17 points lower than the industry average.

Plus, when compared to peers like W.W. Grainger (GWW) and Anixter International (AXE), which are not growing as fast, Wesco's risk/reward tradeoff becomes more appealing. This, coupled with the ongoing recovery in the construction and utility markets points to a fair market value of $105, or 15% higher from current levels.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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