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Will a Bigger Wesco Be Better?

This firm's shares are currently undervalued pending its acquisition of Anixter. We suggest buying in before the market realizes the potential of this combined entity.

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Brian Bernard: Big changes are afoot for Wesco International, which is an industrial distributor with particular strength in the electrical distribution submarket. The narrow-moat-rated firm expects to complete its acquisition of close peer Anixter International during the second or third quarter of 2020.

Wesco's stock currently trades at over a 50% discount to our fair value estimate, but we think sentiment will become more favorable for Wesco as the market begins to realize the growth, earnings power, and free cash flow generation potential of the combined entity. While large-scale combinations like this can be a bumpy ride for investors over the near term as integration efforts often lead to uneven financial performance, we think patient investors will be rewarded.

Brian Bernard does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.