Wesco International Inc.WCC

Morningstar Rating

Stock Research and Analysis

by Anil Daka

Wesco International grew to be one of the largest electrical distributors in the United States by developing strong, long-standing customer relationships and by making strategic acquisitions. Today, Wesco distributes more than 1 million products from Read more

Bulls Say

The firm's national accounts program has grown at a rate of 10% annually during the last 10 years. These key customers are less susceptible to industry downturns.

The firm continues to diversify its product line. For example, acquisition of Communication Supply expanded Wesco's reach into the data communications business.

Wesco has a better operating model. Its sales, general, and administrative expenses comprise only 13% of sales, compared to 19% for peers.

Wesco's top 10 suppliers accounted for only 28% of sales, and the firm had 110,000 customers on its books, so Wesco has strong buyer power and its customers have low bargaining power. Read more

Bears Say

During the 2001-03 downturn, the firm produced operating margins of just 2.5% and revenues dropped 5% for three consecutive years.

Debt on the firm's balance sheet can restrict cash flows and will hamper the firm's acquisition activities.

Along with Wesco, the entire industry is consolidating. As other firms grow through acquisitions, Wesco's size advantage may be diminished. Read more

Strategy

Wesco employs its market-leading position to garner better terms with suppliers and uses its wide product range and technical know-how to handle complex customer requirements. A key component of the Read more

Management

John Engel was announced as the new CEO of Wesco in May 2008. Prior to this he served as the COO of the firm. Ex-CEO Ron Haley continues to lead the board as the executive chairman. On the positive side, the 12-member board consists of nine independent Read more

Profile

Wesco, originally founded as a part of Westinghouse Electric, is a leading distributor of electrical supplies. Construction (39%), Industrial (39%), Utility (16%), and Commercial Read more

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