MSC Industrial Q4: Earnings Beat, 1.3% Sales Growth, Margin Headwinds & More

MSC Industrial Direct Company, Inc. MSM reported fourth-quarter FY23 sales growth of 1.3% year-on-year to $1.035 billion, beating the analyst consensus estimate of $1.01 billion.

Gross profit for the quarter decreased 2% to $419.5 million, with the margin shrinking from 41.9% to 40.5%.

Operating income declined 18% to $118.1 million, with the operating margin compressing 270 basis points to 11.4%.

Adjusted EPS of $1.64 beat the analyst consensus of $1.62.

The company held $50 million in cash and equivalents as of September 2, 2023. Operating cash flow for the year totaled $699.6 million.

"We expanded adjusted operating income during the fiscal year, despite one less selling week and near-term margin headwinds, outgrew the IP Index by 1,000 basis points and produced strong cash generation," said Executive Vice President and CFO Kristen Actis-Grande.

Outlook: MSC sees FY24 ADS growth of 0% - 5%. It expects an FY24 adjusted operating margin of 12% - 12.8% and an operating cash flow conversion of more than 125%.

Erik Gershwind, President and CEO, said, "Fiscal 2023 was a monumental year as we exceeded $4 billion in annual net sales for the first time in company history. Additionally, we enhanced our corporate governance into a structure that is more friendly to all shareholders, built upon our M&A strategy and successfully completed our three-year Mission Critical program that strengthened our growth trajectory and operational excellence."

Price Action: MSM shares are trading lower by 3.53% at $92.05 on the last check Wednesday.