MSC Industrial Earnings Will Be Barometer For Distribution Market

MSC reports its latest quarterly earnings on Wednesday, providing an early look at if the "industrial recession" impacted distributors as badly as the prior quarter, worse, or if there's hope for improvement.

MSC Industrial – No. 14 on Industrial Distribution's 2015 Big 50 List – will report its 2016 first quarter financial earnings on Wednesday, a report that will give similar distributors a good idea of what the updated market conditions are.

MSC's earnings will essentially kick off the latest quarterly reporting period, which for some companies was Q1, while the majority will recap their Q4 and full year 2015. Fastenal (No. 12 on Big 50) will report its Q4/full year on Jan. 15, Grainger (No. 3) will report on Jan. 26. Around a dozen of ID's Big 50 companies will release their earnings and updated financial outlook through mid-February.

In the last reporting period – which covered October through early November – it was downtrodden to say the least. Nearly all of the large industrial distributors that publicly reported their earnings had declining sales and earnings, and most declines were substantial. The common themes of low oil prices and foreign exchange headwinds hurt distributors, and the majority said they expect similar results for the first half of 2016.

Following that gloomy period, in which Fastenal CEO Dan Florness stated that "the industrial environment is in a recession," distributors will be keen to see if this most recently completed quarter will be even worse, just as bad, or if there is improvement.

MSC last reported on Oct. 27 for its 2015 Q4 and full year results. They included Q4 sales of $727.4 million, essentially identical to the $726.6 million in had in Q4 2014. MSC's Q4 profit of $59.17 million was a 6.8 percent decline from Q4 2015 $63.5 million, following a 2.2 percent yearly decline in Q3 to $63.3 million.

In that Q4 report, MSC said it expects its Q1 sales to be between $702 million and $714 million, with average daily sales to decline roughly 3.0 percent at the midpoint. Sales in Q1 2015 were $731.1 million.

Fastenal and Grainger reported their November sales on Dec. 4 and Dec. 11, respectively, and neither were encouraging. Fastenal's November daily sales were down year-over-year for a fifth straight month, and down 11.8 percent from October. Grainger's total November sales were down 2 percent YOY, with organic sales down 3 percent.

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