This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Wesco Expansion Continues to Impress

Stocks in this article: AXE CAT GWW SWK WCC

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.

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs