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Category: MSC Industrial (MSM)
Date: 6 April 2021 Stock price of MSC Industrial: $91.74 Market Capital of MSC Industrial: $5.12 billion We take a a look at the 1st quarter 2021 earnings report of MSC Industrial Supply Co a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services
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We are extremely proud of what we have accomplished this year and how the strategic changes we have made to our business position us for accelerated growth across retail, wholesale and CarMax Auto Finance,” said Bill Nash, president and chief executive officer."
More About MSC Industrial Supply Co
MSC Industrial Supply Co. (NYSE:MSM) is a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with approximately 1.9 million products, inventory management and other supply chain solutions, and deep expertise from over 75 years of working with customers across industries. Our experienced team of more than 6,300 associates is dedicated to working side by side with our customers to help drive results for their businesses - from keeping operations running efficiently today to continuously rethinking, retooling, and optimizing for a more productive tomorrow.
Overview of MSC Industrial 1st quarter 2021 earnings
FISCAL Q1 2021 HIGHLIGHTS
• Net sales of $771.9 million, a 6.3% YoY decrease
• Operating income of $53.9 million, or $84.6 million excluding a $26.7 million impairment charge and $4 million in restructuring and other related costs1
• Operating margin of 7.0%, or 11.0% excluding the impairment charge and restructuring and other related costs1
• Diluted EPS of $0.69 vs. $1.18 in the prior year
• Adjusted diluted EPS of $1.10 vs. $1.21 in the prior year1
• Declared special cash dividend of $3.50 per share on November 17, 2020
• Net sales of $771.9 million, a 6.3% YoY decrease
• Operating income of $53.9 million, or $84.6 million excluding a $26.7 million impairment charge and $4 million in restructuring and other related costs1
• Operating margin of 7.0%, or 11.0% excluding the impairment charge and restructuring and other related costs1
• Diluted EPS of $0.69 vs. $1.18 in the prior year
• Adjusted diluted EPS of $1.10 vs. $1.21 in the prior year1
• Declared special cash dividend of $3.50 per share on November 17, 2020
MSC Industrial management commentary on their 1st quarter 2021 earnings
MELVILLE, NY and DAVIDSON, NC, January 6, 2021 - MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the "Company", a premier distributor of Metalworking and Maintenance, Repair and Operations ("MRO") products and services to industrial customers throughout North America, today reported financial results for its fiscal 2021 first quarter ended November 28, 2020.
Erik Gershwind, president and chief executive officer, said, “Our fiscal first quarter reflected building momentum for our Mission Critical initiative against the backdrop of a challenging but improving environment. We saw continued sequential improvement in sales of non-safety and non-janitorial product lines, while sales of safety and janitorial products, anchored by our PPE program, grew roughly 20%. That momentum continued into December, which we forecast at 2.4% growth over prior year. Inside of the company, we made solid progress against our growth initiatives. We also saw strong execution on the pricing and purchasing fronts, yielding a 30 basis point sequential improvement in gross margin in the quarter despite a headwind from some large PPE sales.”
Kristen Actis-Grande, executive vice president and chief financial officer, added, “Average daily sales were $12.5 million for the quarter and our gross margin was 41.9%. Operating expenses as a percentage of sales after adjusting for $4.0 million of restructuring and other related costs was flat with the prior year period, despite lower sales levels. This was the result of our Mission Critical program, which delivered $8 million of gross cost out in the quarter. While one quarter does not make a year, I am encouraged by the solid start. Our goal remains $90 million to $100 million of gross cost take out through fiscal 2023 versus fiscal 2019. Our reported operating margin was significantly impacted by a $26.7 million asset impairment charge resulting from growing uncertainty over our ability to secure deliveries of nitrile gloves for which we prepaid in September and have not yet received. We are, of course, pursuing all possible paths to either secure the gloves or a refund of our prepayments. From the outset of the pandemic, we have been successful in procuring critical PPE supplies to support our customers. We remain pleased with our PPE program, which has consisted of hundreds of global supply transactions leading to substantial revenues and the ability to support our customers during the pandemic.”
Gershwind concluded, “Our company’s sights are set on two goals to be achieved by the end of fiscal 2023: growing at least 400 basis points above the Industrial Production Index and returning ROIC back into the high teens. We have five growth initiatives powering our market share aspirations, and we are executing significant structural cost reductions that we expect will improve operating expenses as a percent of sales by at least 200 basis points. As we move towards the middle of our fiscal 2021, we are encouraged by the momentum that is building inside of the company, and this is evidenced both by improving operating numbers and the increasing pace with which we are operating the business. We are also encouraged by an environment that, while challenging, is showing some positive indicators, with good news on the vaccine and the recently passed stimulus package hopefully improving the economic outlook over the coming quarters.”
Erik Gershwind, president and chief executive officer, said, “Our fiscal first quarter reflected building momentum for our Mission Critical initiative against the backdrop of a challenging but improving environment. We saw continued sequential improvement in sales of non-safety and non-janitorial product lines, while sales of safety and janitorial products, anchored by our PPE program, grew roughly 20%. That momentum continued into December, which we forecast at 2.4% growth over prior year. Inside of the company, we made solid progress against our growth initiatives. We also saw strong execution on the pricing and purchasing fronts, yielding a 30 basis point sequential improvement in gross margin in the quarter despite a headwind from some large PPE sales.”
Kristen Actis-Grande, executive vice president and chief financial officer, added, “Average daily sales were $12.5 million for the quarter and our gross margin was 41.9%. Operating expenses as a percentage of sales after adjusting for $4.0 million of restructuring and other related costs was flat with the prior year period, despite lower sales levels. This was the result of our Mission Critical program, which delivered $8 million of gross cost out in the quarter. While one quarter does not make a year, I am encouraged by the solid start. Our goal remains $90 million to $100 million of gross cost take out through fiscal 2023 versus fiscal 2019. Our reported operating margin was significantly impacted by a $26.7 million asset impairment charge resulting from growing uncertainty over our ability to secure deliveries of nitrile gloves for which we prepaid in September and have not yet received. We are, of course, pursuing all possible paths to either secure the gloves or a refund of our prepayments. From the outset of the pandemic, we have been successful in procuring critical PPE supplies to support our customers. We remain pleased with our PPE program, which has consisted of hundreds of global supply transactions leading to substantial revenues and the ability to support our customers during the pandemic.”
Gershwind concluded, “Our company’s sights are set on two goals to be achieved by the end of fiscal 2023: growing at least 400 basis points above the Industrial Production Index and returning ROIC back into the high teens. We have five growth initiatives powering our market share aspirations, and we are executing significant structural cost reductions that we expect will improve operating expenses as a percent of sales by at least 200 basis points. As we move towards the middle of our fiscal 2021, we are encouraged by the momentum that is building inside of the company, and this is evidenced both by improving operating numbers and the increasing pace with which we are operating the business. We are also encouraged by an environment that, while challenging, is showing some positive indicators, with good news on the vaccine and the recently passed stimulus package hopefully improving the economic outlook over the coming quarters.”
MSC Industrial (MSM) stock price chart over the last 5 years
The image below shows the stock price history of MSC Industrial (MSM) over the last 5 years. And its not been a good time for MSC Industrial stockholders with the stock increasing by just 2.9% over the last 5 years. No investor would want to see those type of returns.
The stock of MSC Industrial is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of MSC Industrial stock is positive at this point in time.
The stock of MSC Industrial is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of MSC Industrial stock is positive at this point in time.
Latest stock valuation of MSC Industrial (MSM)
So what is MSC Industrial stock worth based on their 1st quarter 2021 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for MSC Industrial at $78.60 a stock
We therefore believe the stock of MSC Industrial is overvalued at its current price of $91.74
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $24.18 thus a good entry point into MSC Industrial would be at $70.80 or below.
We expect the stock of MSC Industrial to pull back in coming weeks and months around our target price (full value price), as their stock is price is close to being fully valued
We therefore believe the stock of MSC Industrial is overvalued at its current price of $91.74
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $24.18 thus a good entry point into MSC Industrial would be at $70.80 or below.
We expect the stock of MSC Industrial to pull back in coming weeks and months around our target price (full value price), as their stock is price is close to being fully valued
Next earnings release of Bassett Furniture
It is expected that MSC Industrial will release their 2nd quarter 2021 earnings report in early July 2021
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