Reece Shares: Unveiling a Hidden Gem in the ASX 200

2 min read | January 22, 2024 05:56 PM AEDT | By Team Kalkine Media

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Reece Shares: Unveiling a Hidden Gem in the ASX 200 — Image source: shutter stock

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Reece Ltd (ASX: REH) has quietly emerged as a strong performer within the S&P/ASX 200 Index, demonstrating notable growth in its share price over the past year, with a 45% increase and nearly 120% surge over the last five years. While past performance does not guarantee future results, Reece seems to be a hidden gem in the ASX industrial stocks, with several factors contributing to its success.

While Reece is widely recognized for its bathroom products and national showroom network in Australia, the company has diversified its growth initiatives. Following an acquisition in 2018 that provided a strong foothold in the United States, particularly in the southern 'sunbelt' states, Reece has expanded its presence with 15 new branches and a strategic acquisition of a 12-branch refrigeration wholesaler in Texas. The company anticipates sustainable growth of around 10 to 15 branches per year in the US, potentially serving as a key driver for Reece shares.

Reece's commitment to investing in Australia and New Zealand is evident through network upgrades and non-plumbing network expansion. Despite potential challenges stemming from interest rate rises and strong inflation, the company's performance remains robust. In the first quarter of FY24, total sales increased by 3% year over year to A$2.6 billion, with ANZ sales rising by 3% and US sales holding steady in US dollar terms.

Although Reece acknowledges potential cost inflation pressure and a softening demand setting, the company maintains a long-term focus. CEO Peter Wilson emphasized the commitment to delivering on customer promises, investing strategically, and navigating cyclical downturns to emerge as a stronger business. With the Wilson family's longstanding involvement in managing Reece and significant ownership of Reece shares, the leadership is motivated to ensure sustained success and avoid unnecessary risks.

In conclusion, Reece Ltd stands out as a resilient and strategically focused ASX 200 share, with a track record of solid performance, diversification, and a long-term vision that positions it for continued success.

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