MSC Industrial Direct Co Inc (NYSE: MSM) in the first quarter of 2017 has reported the adjusted earnings per share of $0.95 beating the analysts’ estimates for earnings per share of $0.93 and is 3 cents above the midpoint of guidance given by the company. MSC Industrial Direct earnings per share grew 6 cents year-over-year due to lower operating expenses and last August’s share buyback. The company had reported the revenue of $686.3 million in the first quarter of 2017, beating the analysts’ estimates of $685.1 million. However, there is a fall of 2.9 percent in the revenue year over year.
Moreover, MSC Industrial Direct has reported the gross margin of 45.0% in 1Q FY 17 due to the continued stabilization in a challenging pricing environment and the operating margin increased year-over-year to 13.2%, despite the net sales has fallen.
The demand environment was difficult in the first quarter of FY 17 and the pricing remained down, however the situation has recovered and is better than expected in November. At the start of the second quarter of FY 17 in December, there is a growth in sales, as well as there is an improvement across all of the customer types and a higher mix of machinery, machine tool accessories, tool holders, and tooling package orders. The capital-related sales have historically increased as the customers are more positive about investing in their businesses. Additionally, MSC Industrial Direct has already operated in the midst of a prolonged industrial recession, especially which was particularly acute in the primary end markets of metalworking manufacturing. However, MSC Industrial Direct is perceiving signs of greater recovery and optimism. In December with the situations improving there is a leveling in manufacturing occurring and saw greater spending on categories that shows the customer optimism with the increase in the order intake.
Meanwhile based on the present situation, MSC Industrial Direct in the second quarter of FY 17 expects to be in the range of $688 million and $701 million. At the midpoint, the average daily sales are expected to increase approximately 1.5%, compared to the corresponding quarter last year. In addition, MSM in the 2Q FY 17 expects the diluted earnings per share to be in the range of $0.86 and $0.90.
MSM stock has risen 55.72% in a year (source: Google Finance). On the other hand, MSM has an average price target of $79, which is a further downside of 14.29%.