MSC Industrial Direct. Co. Earnings Analysis

MSC Industrial Direct Co. Inc.'s second-quarter results were a mix of positives and negatives, and there is something in them for glass-half-full and -empty proponents. Its end markets aren't improving, but they aren't getting much worse. The company continues to execute well and maintain gross margin, but sales growth is disappointing. It was truly a mixed quarter, so let's take a closer look at the details and what to expect going forward.

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4 Stocks Flying in 2016

It's been a difficult first quarter for the industrial sector, with China's growth slowing, talk of an industrial recession in the U.S., and the European Central Bank cutting interest rates to stimulate Europe's economy. Yet somehow, industrial supply companies MSC Industrial Direct Co. (NYSE:MSM), Fastenal Company (NASDAQ:FAST), and W.W. Grainger Inc. (NYSE:GWW) are up an average 16% in 2016. What's going on, and can it continue?

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MSC Industrial Direct Earnings Analysis

MSC Industrial Direct Co.  cheered a depressed market by releasing a set of first-quarter results not quite as bad as many investors had feared. Consequently, the stock rose about 6.6% on a day when the S&P 500 fell nearly 1.5%.  Is it a sign of a recovery in the manufacturing sector, or is it more a story of MSC Industrial's execution in the quarter? Let's take a look at the results to find out.

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Previewing MSC Industrial Direct Earnings

It's no secret that growth in the industrial sector has slowed in the last year, and manufacturing has borne the brunt of it. Worse yet, MSC Industrial Direct Co.'s (NYSE:MSM) competitors, Fastenal (NASDAQ:FAST) and W.W. Grainger, Inc. (NYSE:GWW), have already reported weak sales numbers in December. It's going to be a difficult quarter for the industrial supply companies.
That said, investors will want to keep a keen eye out for MSC Industrial's first-quarter results and commentary on Jan. 6 and hope for signs of future improvement. Here are three things to look for.

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MSC Industrial Earnings Signals a Weak Manufacturing Environment

Anyone with lingering doubts that the manufacturing sector is in a slowdown need only take a look at MSC Industrial Direct's fiscal fourth-quarter results, which were released on Tuesday. Just as rival W.W. Grainger indicated in mid-October, MSC Industrial is seeing a challenging environment in which revenue growth and margin are coming under pressure. In reality, industrial supply companies have limited visibility, so future guidance is subject to change, but they do give a very accurate reading on current conditions. Let's take a look at the earnings report.


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MSC Industrial Earnings Analysis

The latest third-quarter results from MSC Industrial Direct (NYSE:MSM) confirmed the company's position as a potential recovery play, but it also underlined how difficult its end markets are at present. In short, it was a mixed bag of results. Let's take a closer look at the good and bad in the quarter.


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MSC Industrial Direct Earnings Anaylsis and Research

Industrial supply company MSC Industrial Direct (NYSE:MSM) delivered disappointing second-quarter results on Wednesday, and you only have to look at the price chart below to see the company remains in a difficult trading environment. In my article on the previous quarter's report, I noted that management spoke of "a more optimistic outlook from customers," but that prediction was not borne out in the latest results. Let's take a more detailed look at what went wrong.

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