Manufacturing and industrial activity have bounced back strongly since suffering pandemic-driven disruption, despite challenges such as labor shortages and supply chain disruptions. The Manufacturing PMI registered a 2.1% month-over-month growth to 60.8% in February. Manufacturing was driven by strong demand for furniture and electronics.
The trillion-dollar bipartisan infrastructure bill, signed into law last November, should boost the industrial sector significantly. The lead U.S. economist at Oxford Economics, Oren Klachkin, said: “While off to a somewhat rocky start, 2022 will be a good year for U.S. manufacturing.”
Given this backdrop, we think adding quality industrial distribution stocks Fastenal Company (FAST) and MSC Industrial Direct Co., Inc. (MSM) could be wise. These names are currently trading below their 52-week highs but are likely to benefit from the macroeconomic tailwinds.
Fastenal Company (FAST)
FAST in Winona, Minn., does business in the wholesale distribution of industrial and construction supplies. The company offers fasteners, including threaded fasteners, bolts, nuts, screws, studs, and others. It also offers miscellaneous supplies and hardware, including pins, machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, and other accessories. It serves the original equipment manufacturers, maintenance, repair, operations, and non-residential construction market.
FAST’s net sales increased 12.8% year-over-year to $1.53 billion for the fourth quarter, ended Dec. 31, 2021. The company’s net earnings increased 17.9% year-over-year to $231.20 million. Also, its EPS came in at $0.40, representing a 17.6% increase year-over-year.
Analysts expect FAST’s EPS and revenue for the quarter ending March 31, 2022, to increase 16.2% and 16.2%, respectively, year-over-year to $0.43 and $1.65 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 11% in price to close the last trading session at $51.46. It is currently trading 20.5% below its 52-week high of $64.75, which it hit on Dec. 30, 2021.
FAST’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall B rating, which translates to a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FAST has an A grade for Quality and a B grade for Momentum and Stability. It is ranked #31 out of 92 stocks in the Industrial Equipment industry. Click here to see the other ratings of FAST for Growth, Value, and Sentiment.
MSC Industrial Direct Co., Inc. (MSM)
MSM in Melville, N.Y., distributes metalworking and maintenance, repair, and operations (MRO) products and services. Its MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock products, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, material handling products, electrical supplies, and power transmission components.
For the fiscal first quarter, ended Nov. 27, 2021, MSM’s net sales increased 9.9% year-over-year to $848.50 million. The company’s adjusted net income increased 13.1% year-over-year to $70 million. Also, its adjusted EPS came in at $1.25, representing a 12.6% increase year-over-year.
For its fiscal 2022, MSM’s EPS and revenue are expected to increase 19.5% and 10.8%, respectively, year-over-year to $5.75 and $3.59 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined 4.3% to close the last trading session at $77.48. It is currently trading 19.4% below its 52-week high of $96.23, which it hit on May 13, 2021.
MSM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, and Quality. It is ranked #13 in the Industrial Equipment industry. To see the other ratings of MSM for Value, Stability, and Sentiment, click here.
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FAST shares were trading at $51.45 per share on Tuesday afternoon, down $0.01 (-0.02%). Year-to-date, FAST has declined -19.24%, versus a -9.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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