Sunday, May 4, 2014

What the Industrial Supply Companies are Saying About the Economy

Investors in the industrial sector have faced a significant imponderable over the winter. Severe weather conditions were always going hit quarterly earnings, but they were also going to make it harder to judge the underlying conditions in the industrial economy. With these thoughts in mind it's a good idea to look at industrial supply companies such as Fastenal , MSC Industrial Supply, and WESCO International. Not only are they all exposed to the industrial sector, but they tend to have short-cycle order patterns. In other words, they get the first view on where trends are headed.

Fastenal and MSC Industrial give earnings
At the start of this earnings season, Alcoa came down on the side of those who saw the weather as the primary cause of weakness in the construction industry over the winter. The subsequent results from MSC Industrial and Fastenal offer a pretty similar story. For example, MSC's management talked of a weather-relate "slow start" in December and January, but then its organic growth rate picked up from 2%-3% to "the mid-6% range in February." 

Fastenal's improvement in March can clearly be seen by looking at sales growth at its stores that have been open for more than five years: