Grainger, Fastenal, Kaman beat the street
By Staff -- Industrial Distribution, 3/1/1999
Strength in equity markets continues to be in large cap and technology stocks, reflected in the S&P 500 and NASDAQ Composite advancing 4.1 percent and 14.3 percent, respectively, in January. Distribution stocks in the ID/Baird Index appreciated an average of 1.6 percent. However, there has been wide divergence of performance.
In late 1998, profit projections were lowered for many distributors, amid concerns of slower economic growth and reduced future sales volume. Additionally, other issues have selectively influenced industrial distributor profit outlooks, including currency translation; price deflation; heavy investment in information technology; reduced acquisition activity; and labor availability and cost concerns. As distributors demonstrate their ability to grow earnings despite these short-term challenges, we expect multiple expansion to drive better stock price appreciation.
Public distributors are presently in the midst of earnings reporting season, with early indications favorable. Of the 21 firms we monitor, 13 have earnings estimates published by analysts. Seven have reported quarterly numbers, five of which met or exceeded consensus estimates. Fastenal, Grainger and Kaman performed better than anticipated. Applied Industrial Technologies and White Cap Industries met expectations. Coming up short were Pentacon and SunSource.
We continue to believe the distributors which will be best positioned for the future will proactively embrace three investment themes: outsourcing; consolidation; and emerging channel strategies such as direct marketing, electronic commerce, and integrated supply.
Senior vice president Jeffrey Germanotta of R.W. Baird provides analysis for the distribution sector.
DISTRIBUTORS
Company 1/31 close Year change 52 wk. High/Low
Applied Industrial Tech APZ 13.31 -4.1 29.31 12.00
Airgas ARG 10.13 13.3 18.81 8.00
Barnes Group B 22.56 -22.9 34.00 22.06
DXP Enterprises DXPE 8.25 22.2 12.00 6.50
Fastenal Co. FAST 38.56 -12.4 56.88 20.50
Grainger (W W) GWW 40.75 -2.1 54.72 36.44
Hughes Supply HUG 25.38 -13.2 39.81 25.13
Industrial Distrib. Group IDG 7.63 0.0 21.31 4.75
Pentacon JIT 4.56 5.8 14.69 3.13
JLK Direct Distribution JLK 12.13 19.0 39.50 9.00
Kaman Corp. KAMNA 14.56 -9.3 20.38 12.75
Lawson Products LAWS 21.75 -5.4 31.00 20.25
MSC Industrial Supply MSM 25.88 14.4 33.50 12.25
Noland Co. NOLD 25.00 -5.7 29.25 20.00
Premier Farnell PFP 6.44 28.8 14.25 4.75
Sunsource SDP 18.38 -2.3 29.69 13.63
Strategic Distribution STRD 2.44 0.0 7.50 1.81
Vallen Corp. VALN 20.25 1.3 22.75 17.00
White Cap Industries WHCP 16.50 8.2 25.25 6.38
Questron Technology QUST 4.63 2.8 9.88 3.50
Genuine Parts Co. GPC 31.88 -4.7 38.25 28.25
DISTRIBUTION TECHNOLOGY
Company 1/31 close Year change 52 wk. High/Low
Datastream Systems DSTM 10.50 -8.7 27.50 8.75
Edwards J D & Co. JDEC 20.31 -28.4 49.50 19.63
Harbinger HRBC 5.50 -31.3 27.58 3.50
Prophet 21 PXXI 12.88 20.5 20.25 9.00
Sterling Commerce SE 45.00 17.1 50.25 20.13
MANUFACTURERS
Company 1/31 close Year change 52 wk. High/Low
Aeroquip-Vickers ANV 35.25 17.7 72.25 22.00
Black & Decker BDK 53.00 -5.5 65.50 38.94
Baldor Electric BEZ 19.81 -2.2 27.19 18.88
Columbus McKinnon CMCO 22.63 25.7 31.00 13.75
Cooper Industries CBE 41.44 -13.1 70.38 36.88
Danaher DHR 53.50 -1.5 55.25 28.00
Dana DCN 41.13 0.6 61.50 31.31
Emerson Electric EMR 58.19 -3.8 67.44 54.50
Federal-Mogul FMO 59.25 -0.4 72.00 33.00
Ingersoll-Rand Co. IR 47.63 0.8 54.00 34.00
Kennametal KMT 23.50 10.6 54.75 15.63
Makita MKTAY 10.00 -5.9 13.25 9.31
Illinois Tool Works ITW 60.31 4.0 73.19 45.19
3M MMM 77.63 9.1 97.88 65.63
Parker-Hannifin PH 30.75 -6.1 52.63 26.56
Pentair Inc. PNR 38.25 -3.9 46.25 26.75
Kaynar Technologies KTIC 26.88 -1.4 34.50 7.38
Starrett (L.S.) Co. SCX 30.25 -11.8 41.13 29.81
Timken Co. TKR 21.69 14.9 41.94 13.63
Textron TXT 74.44 -2.0 80.94 52.06
Stock charts courtesy of R.W. Baird & Co.
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