MSC Industrial Executes Decently Against Lowered Expectations

MSC Industrial's (MSM) management to close out its fiscal 2019 on a relatively okay note, with the company beating expectations at the core operating income line despite mounting end-market headwinds. MSC Industrial isn't doing as well on gross margin as Fastenal (FAST), and I'll talk about this later, but management is at least explicitly targeting margin improvement efforts in fiscal 2020 at both the gross margin and operating margin lines.

It's tough for an industrial distributor to make great strides during an industrial downturn, but the good ones often pick up market share during these times. I haven't been impressed with MSC Industrial's management in recent years, and this downturn would be a good time for it to pick it up and improve execution. Here in the mid-$70s, valuation is more challenging and the management really needs to execute on sustained margin improvement to justify a substantially higher price on a DCF basis, though an EV/EBITDA approach is substantially more forgiving.

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MSC Industrial Executes Decently Against Lowered Expectations