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MSC sees jump in sales, income on manufacturing strength

MSC Industrial Direct Co. chief executive and president

MSC Industrial Direct Co. chief executive and president Erik Gershwind at his Melville office on May 17, 2016. Credit: Newsday / J. Conrad Williams Jr.

Melville-based MSC Industrial Direct Co. said Wednesday both sales and net income jumped in its fiscal first quarter because of continued improvements in the manufacturing sector and positive sentiments associated with the recently passed Republican tax overhaul legislation.

The company also noted that productivity gains and declining operating expenses helped to boost results.

Sales rose 12 percent to $768.6 million in the quarter ended Dec. 2, from a year earlier. Still, the revenue number fell short of the $770.7 million consensus estimate of securities analysts surveyed by Bloomberg.

Net income climbed 9.8 percent to $59.6 million. Earnings per share rose 9.4 percent to $1.05 for the company, which has a co-headquarters in Davidson, North Carolina.

MSC, one of the world’s largest industrial equipment distributors, derives about 70 percent of its sales from North American manufacturing, so the sector’s fortunes are key to the company’s performance.

“The environment remained solid in the first fiscal quarter, and our own business reflected this momentum, with growth rates improving or holding steady,” Erik Gershwind, president and chief executive, said in a statement.

Gershwind foresees a strong outlook for the company because of an “exciting time” for U.S. manufacturing and MSC on several fronts.

“First, after several years of a weak pricing environment, many suppliers have now raised list prices, and we expect to follow suit in the near term,” he said. “Second, customer sentiment and industry indices are positive, pointing to continued U.S. manufacturing growth prospects.”

The third reason, he said, is that “we see the recent tax reform as a significant tailwind not just for our own [earnings per share], but also for our customers and the broader manufacturing economy in the coming years.”

Rustom Jilla, executive vice president and chief financial officer, also noted the effects of tax reform.

He said MSC’s recently announced 21 percent quarterly dividend increase and its additional share repurchase authorization “are reflective of the significant positive impact of tax reform on our earnings and cash flow, as well as our ongoing commitment to allocating capital to enhance total shareholder returns.”

MSC’s shares closed Wednesday at $92.53, down 5.29 percent, or $5.17, in New York Stock Exchange trading.

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