Why MSC Industrial Direct (MSM) Stock Is Dropping Today

NEW YORK (TheStreet) -- Shares of MSC Industrial Direct Inc.  (MSM) are falling -4.13% to $89.52 after the company said it expects to report fourth quarter adjusted earnings per share of 98 cents to $1.02, below the $1.07 consensus estimate of analysts surveyed by Reuters.

It reported third quarter adjusted earnings per share of $1.06, in line with analysts' expectations. 

Revenue for the quarter was $720.48 million, below the consensus of $727.26 million for the quarter.

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Separately, TheStreet Ratings team rates MSC INDUSTRIAL DIRECT as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate MSC INDUSTRIAL DIRECT (MSM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 16.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MSM's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, MSM has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 48.80% is the gross profit margin for MSC INDUSTRIAL DIRECT which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.48% trails the industry average.
  • Net operating cash flow has slightly increased to $47.10 million or 3.16% when compared to the same quarter last year. Despite an increase in cash flow, MSC INDUSTRIAL DIRECT's average is still marginally south of the industry average growth rate of 7.06%.
  • You can view the full analysis from the report here: MSM Ratings Report
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