Can MSC Industrial Direct Turn Inflation Into Opportunity? Analyst Weighs In

MSC Industrial Direct Co Inc. (NYSE:MSM) is poised to benefit from "inflation-driven margin tailwinds" and a recovery in manufacturing volumes, according to a Stephens analyst.

The MSC Industrial Direct Analyst: Analyst Tommy Moll maintained an Equal-Weight rating, while raising the price target from $85 to $90.

The MSC Industrial Direct Thesis: The company reported its fiscal third-quarter revenues at $971 million, down around 1% year-on-year, with adjusted earnings of $1.08 per share versus $1.33 per share in the same quarter last year, Moll said in the note.

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MSC Industrial Direct's gross margins expanded by 10 basis points (bps) to 41.0% during the quarter, "primarily driven by favorable price/cost," he added.

The share price is up around 21% since Liberation Day and ended the day 6% higher after releasing results, the analyst stated.

Potential catalysts for the stock include MSC Industrial Direct's margins benefiting from inflation and a "manufacturing volume-based recovery, whether driven by the end market itself or MSM’s internal core customer initiatives," he further wrote.

MSM Price Action: Shares of MSC Industrial Direct were down 1.6% to $88.87 at the time of publication on Wednesday.

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