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Msc Industrial Direct Company (MSM)
NYSE:MSM
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MSC Industrial
(NYSE:MSM)
68Neutral
Positive Factors
Customer Growth
MSM sounded positive on its initial read into its web enhancements, noting more accelerating new customer growth.
Margins
Analyst agrees with management that MSM should deliver strong incremental margins once back to growth: this is a company that has >40% gross margin, high fixed costs, and has frequently delivered incrementals in excess of 20-25% during an upcycle.
Negative Factors
Earnings Expectations
1QF25 guidance was well below expectations, and management declined to provide F2025 guidance, citing limited visibility.
Earnings Revisions
Recent challenges with execution and machinery end market softness have led to a series of negative EPS revisions.
Industrial Production
Metalworking and heavy manufacturing end-markets remain soft despite some lift in industrial production.
Tariffs
Falloff in construction and ag equipment production due to tariffs is a key watch item.
MSC Industrial (MSM) vs. S&P 500 (SPY)
Market Cap
$4.19B
Dividend Yield4.47%
Average Volume (3M)676.83K
Price to Earnings (P/E)19.8
Beta (1Y)0.81
Revenue Growth-5.71%
EPS Growth-31.93%
CountryUS
Employees7,191
SectorIndustrials
Sector Strength61
IndustryIndustrial - Distribution
Share Statistics
EPS (TTM)3.80
Shares Outstanding55,721,676
10 Day Avg. Volume862,561
30 Day Avg. Volume676,829
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.14
Price to Cash Flow (P/CF)10.60
P/FCF Ratio13.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$79.00Price Target Upside4.33% Upside
Rating ConsensusHold
Number of Analyst Covering5
MSC Industrial Business Overview & Revenue Model
Company DescriptionMSC Industrial Direct Co., Inc., together with its subsidiaries, distributes metalworking and maintenance, repair, and operations (MRO) products and services in the United States, Canada, Mexico, and the United Kingdom. Its MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock products, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components, and electrical supplies. The company offers approximately 1.9 million stock-keeping units through its catalogs and brochures; e-commerce channels, including its Website, mscdirect.com; inventory management solutions; and call-centers and branches. It operates through a distribution network of 28 branch offices, 11 customer fulfilment centers, and seven regional inventory centers. The company serves individual machine shops, Fortune 1000 manufacturing companies, and government agencies, as well as manufacturers of various sizes. MSC Industrial Direct Co., Inc. was founded in 1941 and is headquartered in Melville, New York.
How the Company Makes MoneyMSC Industrial Direct Co., Inc. generates revenue primarily through the sale of MRO products and services to its diverse customer base. The company operates through a direct sales model that includes e-commerce platforms, catalogs, and a dedicated sales force, which allows it to reach a wide array of industrial and commercial customers. A significant portion of its revenue comes from repeat purchases by businesses looking to maintain operational efficiency and productivity. MSC also leverages strategic partnerships with leading manufacturers and suppliers to offer a broad and competitively priced product range, which is critical in attracting and retaining customers. Additionally, the company benefits from economies of scale and supply chain efficiencies that help optimize its margins.
MSC Industrial Financial Statement Overview
Summary
MSC Industrial exhibits a strong financial foundation with consistent profitability and solid cash flow generation. However, revenue growth has slowed, and there is a decrease in return on equity, suggesting room for improvement in leveraging equity investments.Income Statement
MSC Industrial shows strong profitability with a consistent gross profit margin of around 41%. The net profit margin for the latest TTM is 6.2%, showing a slight dip from previous periods. Revenue has decreased by 5.3% in the most recent TTM compared to the previous annual period, indicating a potential decline in sales momentum.78
Positive
Balance Sheet
The company maintains a solid equity position with an equity ratio of 55.6% in the latest TTM. The debt-to-equity ratio is relatively stable at 0.42, indicating manageable leverage. However, the return on equity has decreased to 17.1% from higher previous levels, suggesting a reduction in profitability on equity investments.72
Positive
Cash Flow
MSC Industrial has demonstrated robust free cash flow generation, with a free cash flow growth rate of 12.6% in the latest TTM. The operating cash flow to net income ratio stands at 1.83, indicating strong cash flow generation relative to net income. However, the free cash flow to net income ratio has slightly decreased to 1.49, reflecting a modest decrease in cash conversion efficiency.75
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 3.75B | 3.82B | 4.01B | 3.69B | 3.24B | 3.19B |
| Gross Profit | |||||
| 1.53B | 1.57B | 1.64B | 1.56B | 1.33B | 1.34B |
| EBIT | |||||
| 336.84M | 390.39M | 483.73M | 468.71M | 301.77M | 350.74M |
| EBITDA | |||||
| 405.19M | 451.03M | 553.43M | 555.87M | 389.60M | 442.31M |
| Net Income Common Stockholders | |||||
| 213.33M | 258.59M | 343.23M | 339.79M | 216.91M | 251.12M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 41.28M | 29.59M | 50.05M | 43.54M | 40.54M | 125.21M |
| Total Assets | |||||
| 2.46B | 2.46B | 2.54B | 2.73B | 2.46B | 2.38B |
| Total Debt | |||||
| 589.65M | 568.17M | 521.42M | 860.77M | 836.40M | 675.46M |
| Net Debt | |||||
| 548.37M | 538.59M | 471.37M | 817.23M | 795.87M | 550.25M |
| Total Liabilities | |||||
| 1.10B | 1.06B | 1.05B | 1.37B | 1.30B | 1.06B |
| Stockholders Equity | |||||
| 1.36B | 1.39B | 1.48B | 1.35B | 1.15B | 1.31B |
| Cash Flow | Free Cash Flow | ||||
| 301.54M | 311.29M | 607.09M | 184.81M | 170.72M | 349.75M |
| Operating Cash Flow | |||||
| 407.12M | 410.70M | 699.58M | 246.18M | 224.46M | 396.74M |
| Investing Cash Flow | |||||
| -120.49M | -123.40M | -112.67M | -94.49M | -75.75M | -49.28M |
| Financing Cash Flow | |||||
| -266.17M | -307.35M | -580.40M | -148.14M | -233.75M | -254.62M |
MSC Industrial Technical Analysis
Neutral
75.72
Price Trends
77.75
Negative
78.75
Negative
79.14
Negative
Market Momentum
-0.33
Negative
46.49
Neutral
32.82
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MSM, the sentiment is Neutral. The current price of 75.72 is below the 20-day moving average (MA) of 76.09, below the 50-day MA of 77.75, and below the 200-day MA of 79.14, indicating a neutral trend. The MACD of -0.33 indicates Negative momentum. The RSI at 46.49 is Neutral, neither overbought nor oversold. The STOCH value of 32.82 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for MSM.
MSC Industrial Risk Analysis
MSC Industrial disclosed 32 risk factors in its most recent earnings report. MSC Industrial reported the most risks in the “Ability to Sell” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
MSC Industrial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $43.85B | 38.17 | 32.35% | 2.09% | 2.71% | -0.63% | |
74 Outperform | $8.90B | 23.48 | 22.70% | 0.68% | 0.37% | 3.52% | |
71 Outperform | $46.50B | 24.78 | 58.98% | 0.85% | 4.19% | 6.60% | |
70 Outperform | $7.51B | 11.79 | 14.34% | 1.10% | -2.53% | -4.03% | |
68 Neutral | $4.19B | 19.79 | 15.53% | 4.47% | -5.71% | -31.93% | |
68 Neutral | $855.49M | 14.15 | 22.49% | 4.52% | 3.26% | -14.20% | |
62 Neutral | $7.68B | 13.06 | 3.21% | 3.34% | 3.62% | -14.40% |
* Industrials Sector Average
Performance Comparison
MSM
MSC Industrial
77.71
-10.85
-12.25%
AIT
Applied Industrial Technologies
220.68
32.74
17.42%
FAST
Fastenal Company
80.64
12.79
18.85%
GIC
Global Industrial Company
22.38
-17.52
-43.91%
GWW
WW Grainger
994.00
46.14
4.87%
WCC
Wesco International
148.42
-9.90
-6.25%
MSC Industrial Earnings Call Summary
Earnings Call Date: Apr 3, 2025 | % Change Since: -3.32% | Next Earnings Date: Jul 9, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed sentiment. While there are significant steps taken towards improving digital capabilities and expanding the solutions footprint, the company is facing notable challenges with declining sales and margins, especially in key sectors like automotive. The positive developments in execution are countered by a soft demand environment.Highlights
Website Upgrades and Marketing Initiatives
Completed significant upgrades to the website to improve search and purchasing experiences. Early indicators show increases in new customer acquisition, website traffic, and daily revenues.
Expansion of Solutions Footprint
Increased the in-plant program count by 24% year-over-year to 387 programs and installed vending machines by 9% to over 28,000 machines.
Growth in Public Sector
Achieved 13.2% year-over-year growth in the public sector customer type.
Network Optimization Initiatives on Track
Progressing towards $10 million to $15 million in annualized savings by fiscal year 2026 through network optimization initiatives.
Lowlights
Decline in Average Daily Sales
Average daily sales declined 4.7% year-over-year, with a 5.5% sequential decline.
Gross Margin Decline
Gross margin of 41% declined 50 basis points year-over-year due to higher priced inventories, customer mix, and acquisition headwinds.
Challenges in Automotive and Heavy Truck Sectors
Automotive and heavy truck sectors remain soft, impacting overall performance.
Operating Margin and Earnings Decrease
Adjusted operating margin decreased 340 basis points year-over-year, and adjusted earnings per share declined from $1.18 to $0.72.
Company Guidance
During MSC Industrial Supply's fiscal 2025 second-quarter conference call, the company reported a 4.7% year-over-year decline in average daily sales, with gross and adjusted operating margins meeting the high end of expectations. Notably, MSC improved its in-plant program count by 24% to 387 and increased its installed vending machines by 9% to over 28,000, despite ongoing soft demand. The company completed website upgrades to enhance customer experience, resulting in a 50% reduction in clicks for checkout and an increase in new customer acquisition and website traffic. Additionally, MSC achieved 13.2% growth in the public sector, while national accounts and core customers showed improvement as the quarter progressed. The company maintained a healthy balance sheet with net debt of approximately $498 million and a free cash flow conversion of 63% for the quarter. Looking forward, MSC anticipates average daily sales in the third quarter to range from a 2% decline to flat year-over-year, with adjusted operating margins expected between 8.7% and 9.3%.MSC Industrial Corporate Events
DividendsBusiness Operations and Strategy
MSC Industrial Declares Cash Dividend for Shareholders
Positive
Mar 26, 2025
On March 26, 2025, MSC Industrial Supply Co. announced that its Board of Directors declared a cash dividend of $0.85 per share, payable on April 23, 2025, to shareholders of record as of April 9, 2025. This decision reflects the company’s ongoing commitment to returning value to shareholders and may have implications for its financial strategy and stakeholder relations.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.