Friday, November 21, 2014

MSC Industrial Earnings Analysis

MSC Industrial (NYSE: MSM  ) reported a mixed set of results for its fourth quarter. Revenue came in better than analyst expectations, but in common with rival industrial supply company Fastenal, MSC Industrial is seeing ongoing margin pressures. Moreover, its guidance for the first quarter of fiscal 2015 was lighter than analyst expectations.

MSC Industrial meets earnings expectations, but guidance disappoints


A quick look at the highlights of its fourth-quarter earnings:

  • Fourth-quarter sales of $726.6 million versus internal guidance of $718 million-$730 million and analyst estimate of $724.8 million
  • Gross margin of 45.6% versus internal guidance of 45.7%-46.1%
  • Operating expenses of $231 million versus internal guidance of $230 million
  • Tax rate of 37.7% versus internal guidance of 36.7%
  • Adjusted non-generally accepted accounting principles EPS of $1.02 versus internal guidance of $0.98-$1.02 and analyst estimate of $1.01

Sales came in ahead of analyst estimates (and above the midrange of company guidance) and EPS topped internal guidance. So why was the stock marked down initially after the report?

3 considerations


There are three things to consider about these results, and investors should watch them closely, because the industrial equipment wholesale industry is always a useful bellwether of the economy.


READ THE FULL EQUITY RESEARCH ARTICLE LINKED