Atkore (ATKR): Riding secular tailwinds

Atkore ATKR 0.00%↑ is an industrial manufacturer and distributor of electrical, safety and infrastructure products in the United States and internationally. While the company has only been public for eight years, its history goes back 60 years to Allied Tube & Conduit, a steel tubing and conduit product manufacturer. 2006 Tyco International acquired Allied Tube & Conduit and established Atkore in 2010. In 2015, Atkore went public to follow its growth strategy. The stock wasn’t extraordinary from IPO until Covid, growing just 45%. Since Covid, however, Atkore has been a ten-bagger fueled by favorable macro tailwinds and its capable management team.

Business Model

Atkore offers a range of products used and needed in constructing and maintaining electrical infrastructure, such as cable trays, fittings, and conduits. As shown below, Atkore covers most of the small parts required. Today, Atkore earns 76% of its revenue from electrical services, 16% from electrical support items, and 8% from other infrastructure items.

Atkore has a straightforward and boring business model: manufacturing small parts and selling them with distribution partners or themselves. These partners include electrical distributors, specialty distributors, buying groups, industrial distributors and big-box retailers. Most revenue is B2B, with 83% of sales via distribution channels (over 13,000 branches) and 13% directly to OEMs. The company serves the new construction, non-residential construction, maintenance, repair and remodel (“MR&R”), residential, OEM, and international markets. The company generates 90% of its sales in the USA. To ensure high availability and fast delivery, Atkore operates six regional service centers in the USA and continues to invest in its network.

Competitive advantage and secular tailwinds

For many of the more than 13,000 electrical-distributor branches in the United States, our products are must-stock lines that form a staple of their business.

Atkore’s moat has several parts. Firstly, Atkore uses the Atkore Business System (ABS) based on the famous Danaher Business System (DBS). John Williamson, a 17-year Danaher veteran, turned Atkore around using the Danaher approach until he retired in 2018, leaving the CEO position to his COO and current CEO Bill Waltz. Let’s dive deeper.