MSC Industrial Posts Strong Q3 Results, Raises Savings Outlook

MSC Industrial Direct Company (MSM) reported stronger-than-expected fiscal Q3 results, topping both earnings and sales estimates, driven by a recovery in the manufacturing end markets, as well as overall economic recovery. Shares of the industrial equipment distributor gained 0.7% on July 7 to close at $91.45.

The company reported adjusted earnings of $1.42 per share, beating analysts’ expectations of $1.38 per share. Net sales of $866.3 million exceeded the consensus estimate of $847.22 million.

Meanwhile, earnings per share remained flat year-over-year, while net sales increased 3.8% on a year-over-year basis. However, adjusted operating margins declined 70 bps year-over-year to 12.6%.

During the quarter, the company’s Mission Critical initiatives remained on track. The company reinvested $7 million towards growth plans leading to a cumulative investment of $15 million year-to-date.

Notably, incremental gross savings of $12 million were recorded during the quarter leading to cumulative savings of $29 million to date for Fiscal 2021 and surpassing the original target of $25 million. (See MSC Industrial stock charts on TipRanks)

Management has raised its guidance for gross and net savings for Fiscal 2021. It forecast to achieve gross savings of $40 million and make investments worth $25 million. This should result in net savings above the initial target of $10 million.

MSM’s CEO Erik Gershwind commented, “We are gaining steam internally and our end markets are strengthening. Strong execution on our Mission Critical initiatives will further support our share capture programs and deliver additional savings over the next two years and beyond. We remain on track to achieve our goals of growing sales 400 basis points above the Industrial Production Index and returning ROIC to the high teens by the end of fiscal 2023.”

Following the earnings announcement, Raymond James analyst Sam Darkatsh maintained a Hold rating on the stock.

Consensus among analysts is a Moderate Buy based on 2 Buys and 2 Holds. The average MSC Industrial price target of $101 implies 10.4% upside potential to current levels.

MSC Industrial scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.