MSC Industrial Direct Co., Inc. (MSM) is expected to deliver year-over-year improvement in both revenues and earnings when it reports second-quarter fiscal 2023 results later this month. Q2 Estimates
The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $935 million, indicating year-over-year growth of 8.5%. The same for earnings per share is pegged at $1.35, suggesting a year-over-year improvement of 4.6%. Earnings estimates have been unchanged over the past 30 days.
In the last reported quarter, MSC Industrial’s revenues and earnings improved on a year-over-year basis. The bottom and the top lines beat the Zacks Consensus Estimate. The company has surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an earnings surprise of 2.4%, on average.
Factors to Note
Around 70% of MSC Industrial’s revenues came from sales in the manufacturing sector. The recent weakness in the manufacturing sector is expected to get reflected in the company’s fiscal first-quarter top line. Per the Federal Reserve’s latest report, industrial production was flat in January 2023 which followed a 1% contraction in December 2022. Also per the Institute for Supply Management, Manufacturing PMI was 47.7%, indicating the fourth month of contraction.
The PMI reading in December 2022 and January 2023 was at 48.4 and 47.4, respectively. The PMI reading in January and February have been at the lowest levels since May 2020’s reading of 43.5% amid the pandemic. Demand has been weak as indicated by the New Orders Index which remained in contraction territory at 47% in February. Companies have reduced output to better match demand leading to the Production Index’s reading of 47.3%. Despite the overall weakness, the impacts of recent acquisitions and MSM’s pricing initiatives are likely to have aided its top-line performance in the quarter under review. In January 2023, the company acquired Buckeye Industrial Supply Co., an independent metalworking distributor based in Columbus, OH, and Tru-Edge Grinding Inc., a St. Henry, OH-based custom tool manufacturer which are likely to have contributed to its top-line growth in the fiscal second quarter. The company’s “Mission Critical” project, which had been initiated to accelerate market share capture and improve profitability through fiscal 2023, has been contributing to its results. In fiscal 2022, MSM achieved its target of $25 million in savings from the project. It is targeting another $15 million in fiscal 2023 and believes that it is on track to exceed its goal of $100 million in savings by the fiscal 2023-end.
Part of this benefit is likely to get reflected in the second-quarter fiscal 2023 results. These savings, along with the company’s pricing actions, are anticipated to have negated the impacts of inflated raw material, labor and freight costs in the quarter.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for MSC Industrial this time around. The combination of a positive
Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can see . the complete list of today's Zacks #1 Rank stocks here You can uncover the best stocks before they’re reported with our Earnings ESP Filter. Earnings ESP: MSM has an Earnings ESP of +4.53%. Zacks Rank: MSC Industrial currently carries a Zacks Rank of 3. Price Performance Image Source: Zacks Investment Research
Shares of the company have gained 9.9% in the past year against the
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