MSC Industrial (MSM) Tops Q1 EPS by 2c, Guides Q2 Above the Street

MSC Industrial (NYSE: MSM) reported Q1 EPS of $0.95, $0.02 better than the analyst estimate of $0.93. Revenue for the quarter came in at $686.3 million versus the consensus estimate of $684.94 million.

GUIDANCE:

MSC Industrial sees Q2 2017 EPS of $0.86-$0.90, versus the consensus of $0.86. MSC Industrial sees Q2 2017 revenue of $688-701 million, versus the consensus of $677.35 million.

Erik Gershwind, president and chief executive officer, said, "While the demand environment remained difficult in our first quarter and pricing remained soft, we saw a better than expected November. As we moved into December, the start of our fiscal second quarter, we saw growth in sales, as well as improvement across all of our customer types and a higher mix of machinery, machine tool accessories, tool holders, and tooling package orders. These capital-related sales have historically increased when customers are more optimistic about investing in their businesses."

Rustom Jilla, executive vice president and chief financial officer, added, "Our first quarter operating margin of 13.2 percent improved over the prior year period despite lower sales, with stable gross margins and continued expense discipline, which offers a glimpse into our leverage potential. Diluted earnings per share were 3 cents above the mid-point of our guidance, with approximately 2 cents from higher than expected sales and the remainder as a result of tight expense management. Our EPS also increased 6 cents year-over-year due to lower operating expenses and last August's share buyback. Finally, our cash flow conversion remained strong, with 139 percent of our net income translating into cash flow from operations."

Gershwind concluded, "We have operated in the midst of a prolonged industrial recession, one that was particularly acute in our primary end markets of metalworking manufacturing. We are, however, seeing signs of greater optimism. At present, it appears that there is a leveling in manufacturing occurring and, in December, we saw greater spending on categories that are indicative of customer optimism. We are certainly more positive than even a few short months ago. Even so, we would need to see sustained increases in order activity before we declare that the environment has turned."

For earnings history and earnings-related data on MSC Industrial (MSM) click here.

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