Yahoo Finance MSC Industrial (MSM) Scales 52-Week High: More Room to Run?
Shares of MSC Industrial Direct Company, Inc. MSM scaled a new 52-week high of $94.12 on Jun 2, before closing the session lower at $93.54.
MSM has a market capitalization of $5.1 billion and a Zacks Rank #3 (Hold), currently.
Over the past year, the company has gained 10%, faring better than the industry, which witnessed a 3.6% decline. The Industrial Products sector and the S&P 500 composite have declined 4.9% and 3.6%, respectively, in the same time frame.
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Solid Q2 Results
The company’s shares have gained 11.8% since it reported solid second-quarter fiscal 2023 (ended on Mar 4, 2023) results. Adjusted earnings per share were $1.45, which surpassed the Zacks Consensus Estimate of $1.35 and also improved 12% year over year. The upbeat performance came on the back of double-digit average daily sales growth and benefits from its Mission Critical initiative.
MSC Industrial generated revenues of around $962 million in the quarter, up 11.5% from $863 million reported in the year-ago quarter. The top line also beat the consensus estimate of $936 million. Average daily sales growth was approximately 11 percentage points higher than the Industrial Production Index.
Upbeat Guidance
The second quarter of fiscal 2022 marked the fourth consecutive quarter of double-digit average daily sales growth for the company. MSM expects this outperformance to continue as it executes its five growth drivers, which are solidifying metalworking, leveraging its portfolio strength, expanding solutions, growing e-commerce and diversifying customers and end markets with a particular focus on the public sector.
MSC Industrial expects average daily sales growth of 5% to 9% for fiscal 2023. The adjusted operating margin is expected between 12.7% and 13.3%. The company expects additional savings of $15 million from the Mission Critical initiative in fiscal 2023. These savings combined with strong productivity are expected to boost margins.
Strategic Acquisitions to Aid Growth
In January 2023, the company completed the acquisition of Ohio-based companies, Buckeye Industrial Supply Co. and Tru-Edge Grinding Inc. This will help fortify and expand its position as the leading metalworking supply distributor in North America. Tru-Edge, along with the company’s existing regrinding business, represents an adjacent value-added service to its core cutting tool business, which signifies a new avenue for growth.
The addition of Buckeye and Tru-Edge builds on MSC’s acquisitions of Deco Tool Supply, Engman-Taylor Company, Wm. F. Hurst Co. and AIS in recent years to expand its reach to manufacturers in the Midwest.
Strong Balance Sheet to Aid Investment in Business
The company’s total debt at the end of the fiscal second quarter was $550 million, which was around $230 million lower than last year’s quarter, primarily from the benefit of the securitization facility. MSM’s total debt-to-total capital ratio at the quarter end was 0.28, lower than the industry’s 0.39. The times interest earned ratio was 17.1.
The company’s capital allocation priority remains investing in growth initiatives to drive portability and pursuing margin-accretive deals through strategic mergers and acquisitions while returning cash to shareholders through dividends.
Upward Estimate Revisions
Earnings estimates for MSM Industrial have also moved up over the past 60 days. The Zacks Consensus Estimate for both 2023 and 2024 bottom line have increased 3%. The favorable estimate revisions instill investors’ confidence in the stock.
Key Picks
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and Pentair plc PNR. WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present, and PNR has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved 17.7% north in the past 60 days. Its shares have gained 26.9% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares have gained 18.6% in the last year.
The Zacks Consensus Estimate for Pentair’s 2023 earnings per share is pegged at $3.66, up 3% in the past 60 days. It has a trailing four-quarter average earnings surprise of 7.2%. PNR has gained 14.9% in the last year.
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MSC Industrial Direct Company, Inc. (MSM) : Free Stock Analysis Report
Pentair plc (PNR) : Free Stock Analysis Report
