11%

MSC Industrial (MSM) was downgraded to Hold rating from Buy at Jefferies. EPS estimates for FY 2009 dip to $3.35 from $3.40 while price target lifts to $50 from $45.

Whether a company offers retail or industrial products, its foundation will be tested by the general economic slowdown. In such an environment, it is crucial to note how a company performs in a challenging scenario. But we cannot study all companies. A good place to begin is to consider companies with continued buybacks. MSC Industrial Direct has recently extended its ongoing buyback plans.

MSC Industrial Direct's board has approved a buyback of up to 7 million shares. The company had 1.9 million shares remaining from its previous authorization, which have been included in the latest repurchase plan. Since the beginning of fiscal 2003, MSC has spent $260.9 million to repurchase approximately 8.1 million shares.

The company executed well during the fiscal first quarter, and its financial performance was strong. The provider of industrial supplies and equipment reported an 8.8% year-over-year rise in net sales to $437.6 million, while net income climbed 16% to $46.9 million. The company's diluted EPS grew by 17% to 70 cents, from 60 cents in the year-ago quarter. The company also has a return-on-equity of 26% and a P/E/G ratio of 0.75.

MSC achieved good cost control during the period, which boosted its bottom line. Also, its cash generation was healthy. However, the fiscal second quarter is expected to be tough, with customers facing rising raw-material and energy costs. The company has projected its diluted EPS for the quarter to be between 68 cents and 70 cents.

CEO David Sandler said MSC is well positioned to gain market share from rivals and grow earnings against the backdrop of a general downturn. This seems slightly optimistic, however. Analysts at Robert W Baird reduced the price target for MSC to $44 from $50 while reiterating a neutral rating. The analysts said in their note to clients that although the company was taking initiatives to address a possible economic slowdown, the ISM manufacturing index was expected to remain below 50, a scenario in which MSC would find it difficult to outperform the market. Earlier in December, Bear Stearns downgraded the company from outperform to peer perform.

MSC's inventory levels have been on the rise and grew last quarter as well. The company plans to adjust inventory over the rest of the fiscal year. This could put margins under pressure.

Shares of the company were trading above $50 until mid-October, when MSC announced earnings guidance for the fiscal first quarter short of Wall Street expectations. The company cited uncertain market conditions as the reason. Shares are currently trading close to their 52-week low of $35.03. I believe this adequately reflects the uncertainties related to an economic slowdown.

So with this company, we have a buyback, extremely smart investors and a CEO that expects to steal market share from competitors. I believe this offers value, and it is time to take a very serious look at MSC Industrial.

MSC Industrial (MSM) was downgraded by Bear Stearns from outperform to peer perform.

Rating on MSC Industrial (MSM) was cut to Market Perform, William Blair said. Company likely to suffer from a slower macroeconomic environment, as 80% of sales are tied to the manufacturing sector.

MSC Industrial (MSM) was downgraded to Neutral, Robert Baird said. Company has 75% exposure to industrial end markets, and will likely be hurt by slower US growth in 2008. $50 price target.

BUY

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MSC Industrial Direct Co., Inc. (MSC) is a direct marketer of a range of industrial products to industrial customers throughout the United States. The Company distributes a line of industrial products to meet its customers' maintenance, repair and operations supplies requirements. MSC offers over 500,000 stock-keeping units (SKUs) through its master catalogs, weekly, monthly and quarterly specialty and promotional catalogs, newspapers and brochures, and the Internet, including its Website, MSCDirect.com. The Company operates primarily in the United States, with customers in all 50 states, through a network of seven customer fulfillment centers (six customer fulfillment centers are located within the United States and one is located in the United Kingdom) and 95 branch offices (94 branches are located within the United States and one is located in the United Kingdom). On June 8, 2006, the Company, through its wholly owned subsidiary, MSC Acquisition Corp. VI, acquired J&L America, Inc.

MSC Industrial direct said it expects fourth earnings of USD 0.69 to USD 0.71 per share excluding charges of USD 0.02 per share ,on revenue of USD 442.0 million to USF 448.0 million .The current sonsensus earnings estimate is USD 0.66 pershare on revenue of 435,1million for the quarter ending August 31,2007.

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