MSC Industrial Direct Co. (NYSE:MSM) stock slipped Wednesday despite the industrial distributor posting a first-quarter earnings and revenue beat, as investors focused on softer near-term margin guidance and a cautious operating outlook that tempered the strength of its results.
The company reported first-quarter adjusted earnings of 99 cents per share, exceeding the analyst consensus estimate of 95 cents and marking a 15.1% increase from a year ago.
Net sales for the quarter stood at $965.7 million, topping expectations of $963.6 million and reflecting a 4.0% year-over-year increase.
Adjusted operating margin increased to 8.4% from 8.0% in the prior year.
The company reported cash and cash equivalents of $40.254 million for the first quarter.
Outlook
For the second quarter of fiscal 2026, MSC Industrial Direct expects average daily sales to grow between 3.5% and 5.5% year over year, with an adjusted operating margin forecast in the range of 7.3% to 7.9%.
For fiscal 2026, the company expects depreciation and amortization expenses between $95 million and $100 million and interest and other costs of about $35 million.
The company plans capital expenditures of $100 million to $110 million while targeting a strong free cash flow conversion of around 90% and an effective tax rate between 24.5% and 25.5%.
Management Commentary
Martina McIsaac, President and CEO, said the company opened the fiscal year with solid execution, building on momentum from recent growth initiatives. She noted that average daily sales came in at the midpoint of guidance and outperformed the Industrial Production Index by about 180 basis points, even after absorbing roughly 100 basis points of pressure from the government shutdown.
Greg Clark, Vice President and Interim CFO, said the company translated that growth into margin gains, delivering 10 basis points of operating margin expansion, or 40 basis points on an adjusted basis year over year, landing toward the upper end of its guidance range. The margin improvement drove double-digit earnings per share growth on both a reported and adjusted basis, he added.
Looking ahead, McIsaac said she remains encouraged by the company’s early fiscal-year performance. She emphasized continued progress on growth initiatives and ongoing efforts to optimize cost-to-serve, which supported the return to operating margin expansion this quarter. While holiday timing led to a slower start to the second quarter and is weighing on average daily sales expectations, she said management remains confident that profitable growth will persist through fiscal 2026 and beyond.
MSM Price Action: MSC Industrial Direct Co shares were down 1.93% at $83.30 during premarket trading on Wednesday, according to Benzinga Pro data.
Photo by T. Schneider via Shutterstock
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