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MSC Industrial Supply (MSM +8%) is not a name that rolls off the tongue of most investors but it's a company that Briefing.com keeps an eye on because it provides a glimpse into the industrial economy. MSM is a distributor of metalworking and maintenance supply products, including abrasives, clamps, fasteners, hand tools, tubing, and janitorial supplies.

The company reported decent Q2 (Feb) results this morning:

• Non-GAAP EPS came in at $1.00, right in-line with prior guidance of $0.97-1.03.
• Revenue fell 4.5% yr/yr to $786.1 mln, which was also in-line, but was on the lower end of prior guidance of $781-798 mln.
• As a provider of essential services to many organizations on the front lines, MSM does not plan to shut down its customer fulfillment centers.
• Something that stood out to us was that MSM actually pushed through a price increase in early March and realization has been quite good. However, the virus has since impacted its business:
  • Sales dropped off significantly over the last two weeks as customer shutdowns spread rapidly across the nation.
  • As the month progressed, large orders and sales of safety and janitorial products surged, particularly to government customers, while sales of other product lines dropped significantly.
• MSM says it has ample liquidity to run the business and fund the dividend.

While MSM did not provide quarterly guidance (although MSM will be providing monthly sales updates as the quarter progresses), it sounds like MSM will see a benefit in Q3 (May) and early Q4 (Aug). Specifically, MSM noted an unusually large gap between orders (bookings) and invoicing developed. The gap is a function of the surge in safety and janitorial orders, scarcity of product, and longer lead times. MSM expects the majority of these bookings will invoice during the April-June timeframe which should provide a buffer to the softness that may be yet to come.

Our overall take is that MSM's near term outlook appears mixed. Some product categories will take a hit but a surge in safety and janitorial products should help to soften the blow. Also, we think MSM's comment on its dividend is adding a boost here. MSM pays a lofty 5.0% dividend yield and it sounds safe at least for now. These factors are helping to boost the stock today.