A week ago, MSC Industrial Direct Co., Inc. (NYSE:MSM) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. MSC Industrial Direct beat earnings, with revenues hitting US$835m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 12%. The 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on MSC Industrial Direct after the latest results.
Taking into account the latest results, MSC Industrial Direct's 13 analysts currently expect revenues in 2021 to be US$3.23b, approximately in line with the last 12 months. Statutory earnings per share are expected to shrink 4.1% to US$4.59 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.32b and earnings per share (EPS) of US$4.66 in 2021. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The consensus has reconfirmed its price target of US$73.89, showing that the analysts don't expect weaker sales expectations next year to have a material impact on MSC Industrial Direct's market value. 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. Currently, the most bullish analyst values MSC Industrial Direct at US$82.00 per share, while the most bearish prices it at US$60.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting MSC Industrial Direct is an easy business to forecast or the the analysts are all using similar assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.9%, a significant reduction from annual growth of 4.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.1% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MSC Industrial Direct is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. The consensus price target held steady at US$73.89, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for MSC Industrial Direct going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for MSC Industrial Direct that you need to be mindful of.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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