MSC Industrial Direct Co. (MSM) continues to beat expectations and raise guidance for the next quarter.
This Zacks #2 Rank stock is expected to grow its earnings per share at 17.6% per year for the next three to five years, while providing a current dividend yield of 1.4%
Investment Story
MSC Industrial Direct Co. is a direct marketer and distributor of metalworking and maintenance, repair, and operations (MRO) supplies to industrial customers. Its product line includes cutting tools, measuring instruments, fasteners, and abrasives.
Last week, the company indicated that it experienced improving market conditions in its fiscal second quarter, and it was able to beat its internal expectations. Management remains focused on taking market share and making steady progress on its strategic investment programs.
MSM also noted that while the recovery is still in its early stages, the company has seen its sales growth rate accelerate and believes its sales momentum is real and sustainable going forward.
Earnings Trends
The company recently reported fiscal second-quarter EPS of $0.48, beating the Zacks Consensus by a penny. In the last five quarters, MSM has beaten consensus EPS estimates by an average of 7.8%.
For the fiscal third quarter, the company expects net sales of $436.0 million to $448.0 million and earnings per share of $0.63-$0.67. The prior Zacks Consensus Estimate for fiscal Q3 was $0.55.
The company’s second-quarter earnings beat and bullish guidance for the third quarter prompted analysts to lift their estimates for fiscal 2010 and 2011.
In the last month, the Zacks Consensus Estimate for fiscal 2010 is up 18 cents, or 8.7%, and fiscal 2011 consensus estimates are up 27 cents, or 10.5%.
And in the last seven days, there have been 18 upward revisions to the company’s earnings estimates.
Financial Health
At February 2010, MSM had cash and equivalents of $246 million and long-term debt of just 91,000. That translates to net cash per share of $3.90. In addition, the company generated $74.3 million in cash flow from operations in the first two quarters of 2010 with $12.7 million in capital expenditures. That resulted in free cash flow of $61.5 million.
The Chart
MSM shares gapped higher on April 7 after the company reported better-than-expected results for its fiscal second quarter. The stock is down about $2 from its 52-week closing high, but it still holding its gap up.
