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Equity Bottom-Up

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<h2>Best Idea Wesco is embracing digitalization, Big Data, and ESG to foster a winning strategy.</h2>
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<p><a href="https://www.smartkarma.com/entities/wesco-international-inc" target="_blank" data-smartkarma-citation="entities:13618:1">Wesco International (WCC US)</a> used its 2019 investor day on June 13 as an opportunity to provide an update on several of its key initiatives, including expanding its e-commerce capabilities, bolstering its environmental, social, and governance, or ESG, standing, and improving its financial performance. Expanding its digital capabilities is prudent because we think buyer preferences will continue to shift toward e-commerce channels. While Wesco's ESG focus is good in its own right for the environment and for supporting important social endeavors, it could also attract ESG investors and improve its bottom line. Finally, we were pleased that management's long-term financial plan is almost dead-on with our projections, which support our $88 per share fair value estimate. Wesco currently trades at over a 40% discount to our fair value estimate, with a medium uncertainty rating, which results in an attractive 5- star rating. We think Wesco is a compelling investment opportunity, so we have included the stock on our global Best Ideas list.</p>
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<h2>Key Takeaways</h2>
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<li>Wesco is embracing digitalization and Big Data to improve financial performance, and its efforts are already affecting results. Indeed, Wesco has enjoyed two straight quarters of year-over-year gross profit margin expansion, while many other industrial distributors have struggled to maintain gross margins.</li>
<li>While Wesco's ESG initiatives are positive for the environment, they're also good for the firm's bottom line. Indeed, we expect retrofit spending aimed at making buildings smarter, safer, and more energy-efficient will continue to be a long-term secular growth catalyst for Wesco</li>
<li>Other key secular growth drivers include data center expansion, power-grid modernization, and growing demand for outsourced supply chain management services as customers look to reduce operating costs. We also believe Wesco can use its global scale, broad product assortment, and expanding e-commerce and service capabilities to accrue market share over the coming years.</li>
<li>We expect volume-driven operating leverage and Wesco's technology-driven initiatives to improve operating margin, but we're not forecasting a herculean improvement.</li>
<li>Wesco's stock is trading at over a 40% discount to our $88 per share fair value estimate, with medium uncertainty, which results in an attractive 5-star rating. Wesco's resilient cash flow profile throughout the cycle and long-term supply agreements make us comfortable assigning Wesco a medium uncertainty rating.</li>
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Best Idea Wesco is embracing digitalization, Big Data, and ESG to foster a winning strategy.


Wesco International (WCC US) used its 2019 investor day on June 13 as an opportunity to provide an update on several of its key initiatives, including expanding its e-commerce capabilities, bolstering its environmental, social, and governance, or ESG, standing, and improving its financial performance. Expanding its digital capabilities is prudent because we think buyer preferences will continue to shift toward e-commerce channels. While Wesco's ESG focus is good in its own right for the environment and for supporting important social endeavors, it could also attract ESG investors and improve its bottom line. Finally, we were pleased that management's long-term financial plan is almost dead-on with our projections, which support our $88 per share fair value estimate. Wesco currently trades at over a 40% discount to our fair value estimate, with a medium uncertainty rating, which results in an attractive 5- star rating. We think Wesco is a compelling investment opportunity, so we have included the stock on our global Best Ideas list.

Key Takeaways

Wesco is embracing digitalization and Big Data to improve financial performance, and its efforts are already affecting results. Indeed, Wesco has enjoyed two straight quarters of year-over-year gross profit margin expansion, while many other industrial distributors have struggled to maintain gross margins.
While Wesco's ESG initiatives are positive for the environment, they're also good for the firm's bottom line. Indeed, we expect retrofit spending aimed at making buildings smarter, safer, and more energy-efficient will continue to be a long-term secular growth catalyst for Wesco
Other key secular growth drivers include data center expansion, power-grid modernization, and growing demand for outsourced supply chain management services as customers look to reduce operating costs. We also believe Wesco can use its global scale, broad product assortment, and expanding e-commerce and service capabilities to accrue market share over the coming years.
We expect volume-driven operating leverage and Wesco's technology-driven initiatives to improve operating margin, but we're not forecasting a herculean improvement.
Wesco's stock is trading at over a 40% discount to our $88 per share fair value estimate, with medium uncertainty, which results in an attractive 5-star rating. Wesco's resilient cash flow profile throughout the cycle and long-term supply agreements make us comfortable assigning Wesco a medium uncertainty rating.


Key Takeaways From Wesco's 2019 Investor Day