Based on the latest financial report and acquisition news from MSC Industrial Supply Co., the MRO and industrial distributor has found its groove and has a clear sense of the direction it’s heading.

In the fiscal third quarter ended May 29, Melville, New York-based MSC reported sales grew 3.8% to $866.3 million and profit spiked 21.5% to $94.4 million compared to the year-ago period. The company easily topped analysts’ revenue and earnings expectations.

CEO Erik Gershwind said the upbeat performance was a testament to some of the moves the company made of late, including a commitment to cost-cutting and then reinvesting those savings into several growth initiatives that include solidifying its metalworking capabilities; leverage its portfolio strength; expanding solutions; growing e-commerce; and diversify its customer base and end markets.

“We are seeing the benefits of the strategic pivot that’s been made by our company over the past few years,” he told analysts on the company’s 3Q earnings call. “We made significant investments across the organization to transition from a leading spot-buy provider to a ‘mission critical’ partner on the plant floor, augmented by our spot-buy capabilities. With the bulk of the less visible changes completed, we outlined our plan to return to historic levels of revenue and earnings growth, consistent with the legacy of our company.”

The company’s pivot hinges on its “mission critical” program, which was designed to “translate those investments into superior financial performance,” Gershwind said, adding that the company outlined two goals to underpin its growth efforts.

“First, to accelerate market share capture with a target growth rate of at least 400 basis points above IP by the end of our fiscal 2023,” he said. “Second, to return ROIC into the high teens, powered not only by leveraging growth but also by structural cost take out of $90 million to $100 million also by the end of fiscal 2023. This year, our fiscal 2021 began our proof of concept, with our fiscal third quarter serving as the latest encouraging data point.”

CFO Kristen Actis-Grande provided some more color around the company’s mission critical goals, which included $90 million to $100 million of cost takeout through fiscal 2023 versus fiscal 2019.

“Our cumulative savings for the first half of fiscal ’21 were $17 million and we saved another $12 million in our third quarter, bringing our year-to-date savings to $29 million against our goal of $25 million by the end of this year,” she said. “We also had invested roughly $7 million to $8 million in the first half of fiscal ’21 and we invested another $7 million in our third quarter, bringing our total year-to-date investments to $15 million, which compares to our original full-year target of $15 million.”

Read much more about MSC’s mission critical pivot in the recent MDM Premium article, MSC Industrial Supply Pushes Forward on Transformation While Keeping Family Values.

MSC’s aerospace play

A strong financial show in the most recent quarter isn’t the only reason MSC feels buoyant. On June 1, the company announced that it had acquired a majority interest in Wm. F. Hurst Co. LLC, a Wichita, Kansas-based distributor of metalworking tools and supplies with a significant presence in the aerospace industry.

The financial terms of the deal weren’t disclosed at the time, but MSC’s latest 10-Q shows the company paid $15.2 million for 80% ownership of the company.

While the deal technically didn’t occur until the start of MSC’s fiscal fourth quarter, Gershwind spoke at length about it on the earnings call. He said the “deal is meaningful to MSC in several ways.”

“Hurst goes to market with a highly specialized and highly technical sales force,” Gershwind said. “It fills out a geography in which MSC was under-penetrated. And more importantly, [the company] brings technical capabilities that we can leverage across the entire MSC business. Aerospace is roughly 10% of total MSC sales today. It’s an industry that is poised for strong growth coming out of the pandemic. And the Hurst platform will considerably enhance our effectiveness in serving and growing that portion of our business.”

Wm. F. Hurst will continue to go to market under its current name as “an MSC company.” Gershwind added that Hurst CEO John Mullen “remains at the helm, and retains a meaningful ownership stake in the business.”

“We think that it is a good fit in terms of an end market for MSC for a number of reasons,” Gershwind said. “First and foremost, we can move the needle for our customers’ productivity using metalworking. We think we have ways to grow in penetrating that [aerospace] market. We like the timing of Hurst because aerospace obviously has been on its back and we think has a long way to go in recovery. And what excites us is the team there — it’s really technical and really focused.”

MSC’s moves have been well-received by the Street. MSC’s stock (NYSE: MSM) has grown in the low-single digits since reporting 3Q earnings earlier this week to $91.87 at market close Friday. The company’s shares are up about 50% since last fall.

Baird analyst Dave Manthey wrote in a note to investors following the earnings release: “After the company’s conference call discussing better-than-expected May-quarter results, MSM opened ~2% lower, then trended up steadily, ultimately outperforming the S&P 500 on the day. Management struck a confident tone, raising or reiterating targets, citing confidence on demand/pricing trends, as well as gross and contribution margin outlooks. We believe MSM is well-positioned cyclically, with good strategic direction and will continue to outperform the market from here.”