MSC Industrial’s Revenues Fall Short Of Estimates In 2Q; Shares Drop 4.5%

MSC Industrial Direct Co. shares dropped 4.5% in morning trading on Wednesday as the metalworking maintenance, repair, and operations company’s revenues declined 1.5% year-on-year in 2Q to $774 million falling short of analysts’ estimates of $778.8 million. Adjusted diluted earnings per share fell 4.9% year-on-year to $1.03 but came in above consensus estimates of $1.02 per share.

MSC Industrial’s (MSM) President and CEO, Erik Gershwind said, “Our fiscal second quarter reflected solid execution in a choppy, but improving environment. Improvement in sales levels of our non-safety and non-janitorial product lines continued through the quarter and turned positive in March. Sales of our safety and janitorial products grew in the mid-teens.”

Gershwind added, “We have strengthened our value proposition, with more to come, and further strengthened and extended our leadership position in our core business of Metalworking. We are well on-track to achieve our goals of growing 400 basis points above the Industrial Production Index and returning ROIC back to the high teens by the end of fiscal 2023.”

The company also said that it aims to have gross cost savings of between $90 million to $100 million through FY2023 and it is currently at the high end of that range.

The company had average daily sales of $12.7 million in 2Q while gross margin was 38.1%, a decline of 400 basis points year-on-year as a result of a $30 million write-down of property, plant, and equipment (PPE) in the second quarter. (See MSC Industrial Direct Co. stock analysis on TipRanks)

On April 5, Deutsche Bank analyst Kevin Marek lowered the price target from $90 to $89 and reiterated a Hold rating on the stock. Marek said in a note to investors, “After a December in which monthly sales were buoyed by CARES Act spending, January is likely to have shown a more measured rate of improvement typical of the recovery in prior months.”

“However, weather-related disruptions temporarily hindered economic activity in February,” Marek added.

The rest of the Street is also sidelined on the stock with a Hold consensus rating. That’s based on 3 analysts suggesting a Hold. The average analyst price target of $89.50 implies around 2.6% upside potential to current levels.