How the public companies fared in the first quarter of '98
By Staff -- Industrial Distribution, 5/1/1998
Newton, Mass.--The first quarter was generally a good period for investors in distribution firms. Of the 12 publicly traded firms charted by ID, 10 finished the quarter with gains in their stock price, with six managing solid double digit growth.Leading the pack was Barnes Group, owner of Bowman Distribution, which appreciated 47 percent in the first quarter. Strategic Distribution posted nearly as impressive of a gain (44 percent), while MSC Industrial Supply (27.3%) and Airgas (25 percent) also began the year with strong upswings.
Only Vallen Corp., Lawson Products and DXP Enterprises saw their stock prices decline in the first quarter.
"We're seeing continued modest growth in the economy, low interest rates, low inflation and improvements in industrial production, which generally makes for a positive environment for industrial products and distributors," says Jeffrey Germanotta, first vice president at Baird, which tracks distribution stocks. "Three very significant names (W.W. Grainger, MSC and Fastenal) have released [earning reports] and have met or exceeded expectations, and their stocks have responded favorably. Our expectations are up for most of the group."
That seems to be the opinion of several analysts. In recent weeks, two positive reports have been published on Pentacon, the rollup of five fastener distributors that went public in March. Similarly, on April 14, BancAmerica Robertson Stephens research analyst Andrew Jeffrey initiated coverage on IDG with a buy rating and 12-month target price of $30.
Fastenal reported positive first-quarter earnings last month and saw its stock jump from $40 to over $50 in two days. The firm has experienced 30 to 35 percent growth in the past several years, and recently has "experimented with growing faster" at 40%, according to Robert W. Baird & Co. analyst Judith Scott.
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