Ferguson (NYSE:FERG) vs. WESCO International (NYSE:WCC) Critical Review

WESCO International (NYSE:WCC) and Ferguson (NYSE:FERG) are both large-cap industrials companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, valuation, profitability, institutional ownership, risk, analyst recommendations and earnings.

Risk and Volatility

WESCO International has a beta of 1.53, meaning that its stock price is 53% more volatile than the S&P 500. Comparatively, Ferguson has a beta of 1.13, meaning that its stock price is 13% more volatile than the S&P 500.

Earnings and Valuation

This table compares WESCO International and Ferguson”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
WESCO International	$23.51 billion	0.74	$640.20 million	$14.47	24.68
Ferguson	$31.32 billion	1.38	$1.86 billion	$8.51	26.18

Ferguson has higher revenue and earnings than WESCO International. WESCO International is trading at a lower price-to-earnings ratio than Ferguson, indicating that it is currently the more affordable of the two stocks.

Dividends

WESCO International pays an annual dividend of $2.00 per share and has a dividend yield of 0.6%. Ferguson pays an annual dividend of $3.56 per share and has a dividend yield of 1.6%. WESCO International pays out 13.8% of its earnings in the form of a dividend. Ferguson pays out 41.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. WESCO International has increased its dividend for 2 consecutive years.

Profitability

This table compares WESCO International and Ferguson’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
WESCO International	2.84%	14.95%	4.45%
Ferguson	6.82%	37.24%	12.31%

Analyst Recommendations

This is a breakdown of current ratings for WESCO International and Ferguson, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
WESCO International	0	1	6	1	3.00
Ferguson	0	5	10	2	2.82

WESCO International presently has a consensus target price of $394.17, indicating a potential upside of 10.39%. Ferguson has a consensus target price of $285.57, indicating a potential upside of 28.20%. Given Ferguson’s higher probable upside, analysts clearly believe Ferguson is more favorable than WESCO International.

Insider & Institutional Ownership

93.8% of WESCO International shares are held by institutional investors. Comparatively, 82.0% of Ferguson shares are held by institutional investors. 2.6% of WESCO International shares are held by insiders. Comparatively, 0.2% of Ferguson shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Ferguson beats WESCO International on 11 of the 18 factors compared between the two stocks.

About WESCO International

WESCO International, Inc. provides business-to-business distribution, logistics services, and supply chain solutions in the United States, Canada, and internationally. It operates through three segments: Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility and Broadband Solutions (UBS). The EES segment supplies products and supply chain solutions, including electrical equipment and supplies, automation and connected devices, security, lighting, wire and cable, and safety, as well as maintenance, repair, and operating (MRO) products. This segment also offers contractor solutions, direct and indirect manufacturing supply chain optimization programs, lighting and renewables advisory services, and digital and automation solutions. The CSS segment operates in the network infrastructure and security markets. This segment sells products directly to end-users or through various channels, including data communications contractors, security, network, professional audio/visual, and systems integrators. It also provides safety and energy management solutions. The UBS segment offers products and services to investor-owned utilities; public power companies; and service and wireless providers, broadband operators, and contractors. This segment's products include wire and cables, transformers, transmission and distribution hardware, switches, protective devices, connectors, conduits, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. This segment also offers various service solutions, including fiber project management, high and medium voltage project design and support, pre-wired meters and capacitor banks, meter testing and metering infrastructure installation, personal protective equipment dielectric testing, and tool repair, as well as emergency response, storage yard, materials, and logistics management. The company was founded in 1922 and is headquartered in Pittsburgh, Pennsylvania.

About Ferguson

Ferguson Enterprises Inc. distributes plumbing and heating products in North America. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers. In addition, it offers customized solutions, such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation, and project management services, as well as after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, and repair and operations support. The company sells its products through a network of distribution centers, branches, counter service and specialist sales associates, showroom consultants, and e-commerce channels. Ferguson Enterprises Inc. was founded in 1953 and is headquartered in Newport News, Virginia.