Seeking Alpha: Weak Metalworking Corroding MSC Industrial's Growth

When I last wrote on MSC Industrial (MSM) about a month ago, I suggested that the solid average daily sales growth being reported by Grainger (GWW) and Fastenal (FAST) on a monthly basis was threatening to put the company in the penalty box with some investors. See, the challenge for MSC Industrial has long been in proving that it's more than a cyclical industrial supplier and that it can grow consistently, albeit even if not on the same level as Fastenal.

Unfortunately for investors, MSC Industrial's fiscal third quarter earnings were decidedly mediocre in that respect. Although the company did as it said it would in terms of revenue and exceeded its own guidance for operating efficiency, the relatively weak daily growth highlights the challenges of the company's focus on the metalworking industry and puts even more pressure on management to exploit the BNDA acquisition for all its worth in terms of broadening its addressed markets.

The question for investors now is one of time horizon and patience. I do believe the company is making considerable investments today that will underpin above-average growth in the coming years (likely starting around the second half of 2014). I likewise believe that U.S. manufacturing (and particularly metalworking businesses) can and will recover in 2014. So while I continue to find MSC Industrial undervalued on a long-term basis, the exposure to the clearly underperforming metalworking industry could make it harder for these shares to outperform in the meantime.

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Weak Metalworking Corroding MSC Industrial's Growth