Last week, you might have seen that MSC Industrial Direct Co., Inc. (NYSE:MSM) released its first-quarter result to the market. The early response was not positive, with shares down 2.7% to US$75.59 in the past week. MSC Industrial Direct reported US$824m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.18 beat expectations, being 4.0% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we’ve gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, MSC Industrial Direct’s twelve analysts currently expect revenues in 2020 to be US$3.34b, approximately in line with the last 12 months. Statutory earnings per share are forecast to reduce 5.4% to US$4.80 in the same period. Before this earnings report, analysts had been forecasting revenues of US$3.36b and earnings per share (EPS) of US$4.98 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
The consensus price target held steady at US$75.44, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on MSC Industrial Direct, with the most bullish analyst valuing it at US$83.00 and the most bearish at US$60.00 per share. This shows there is still quite a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the MSC Industrial Direct’s past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 0.5% revenue decline a notable change from historical growth of 3.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 4.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – analysts also expect MSC Industrial Direct to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for MSC Industrial Direct. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$75.44, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple MSC Industrial Direct analysts – going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether MSC Industrial Direct’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.