MSC Industrial Executing Better, And The Street Has Noticed

I’ve been highly critical of MSC Industrial (NYSE:MSM) management at times, but I have to acknowledge that this latest round of strategic initiatives – initiatives that include expanding and highlighting value-added services for customers, pursuing new channels, expanding the portfolio, and streamlining expenses – have not only been executed adroitly, but have produced real benefits. With that, the shares have continued to outperform Fastenal (FAST) since my last update (and over the past year), though Grainger (GWW) and Applied Industrial (AIT) have done better still.

I believe that 2023 is going to see MSC Industrial’s improving execution collide into a more challenging macro environment that will see weaker short-cycle operating conditions as well as improving supply conditions that reduce some of the value provided by top distributors like MSC and Fastenal. While MSC shares do look undervalued on mid-single-digit revenue growth and further margin leverage (as well as on margins and returns), holding an industrial supplier into a period where metrics like ISM and industrial production could decline is a riskier proposition.

 

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MSC Industrial Executing Better, And The Street Has Noticed