Analyst Note| Brian Bernard, CFA, CPA |
In our view, narrow-moat MSC Industrial's fiscal third-quarter results tell a story of solid management execution amid an economic recovery. The firm reported almost 4% sales growth after six consecutive quarters of year-over-year declines. Considering a difficult prior-year sales comparison and the significant decrease in COVID-19 cases in the United States, we weren't surprised that MSC's safety and janitorial-related product revenue declined 42% year over year. However, the rest of MSC's product portfolio more than made up for the slack, and sales of all other products increased 21% year over year. Management expects double-digit fourth-quarter revenue growth on an easy prior-year comparison (reported fourth-quarter 2020 sales were down 11%). We're modeling 2% full-year sales growth in fiscal 2021 and see mid-single-digit revenue growth thereafter as MSC's growth initiatives take hold amid strengthening end markets.