UPDATE: MSC's Profit, Outlook Send Shares To All-Time High

MSC Industrial Direct Co.'s (MSM) fiscal second-quarter earnings rose 17%, beating its own estimates, as the company said it had become more positive on the economic recovery and forecast current-quarter results above expectations, sending shares to new highs.

David Sandler, chief executive of the industrial and maintenance products distributor, said that, after the most challenging environment in his 35-year career, the industrial world was catching its breath now. And after MSC Industrial pared hours and froze salaries to cope with that environment, in the current third quarter almost all those hours have been restored, as has some of the compensation, Sandler said.

"We expect this restoration to continue, because as you will see from Q3 guidance we are experiencing rapid top-line growth," Sandler said during a conference call with analysts, according to a transcript from FactSet Research.

That forecast called for current-quarter earnings of 63 cents to 67 cents a share on revenue of $436 million to $448 million. Analysts surveyed by Thomson Reuters had been expecting 55 cents and $414 million, respectively.

Chief Operating Officer Erik Gershwind said during the call that the company was seeing more customers experiencing "real growth."

"To be clear, this is the most optimistic that we've been since the downturn began," Gershwind said. "We believe that the revenue momentum is real and sustainable as there is little in the way of inventory re-stocking to date."

The bullishness had shares climbing to an all-time high, hitting $57.96 at one point and closing up 8% to $57.47 on nearly seven times its average volume.

The sentiment was also spreading to other industrial parts companies, including Fastenal Co. (FAST), which supplies nuts and bolts to industrial companies, and DXP Enterprises Inc. (DXPE), which does similar distribution of industrial parts and products. Fastenal gained 3.3% to $51.72 recently and earlier hit its highest point since September 2008. DXP rose 5.9% to $14.18. Both were on higher than average volumes.

Piper Jaffray analyst Thomas Hayes said it appeared MSC had set the bar high for Fastenal and the industry, which will boost expectations further for Fastenal's own first-quarter release next week.

"I think there has been an increased understanding that the manufacturing market has stabilized," Hayes said.

Morgan Stanley's Brent Rakers said the sympathy from MSC was boosting many of the stocks.

For MSC's quarter ended Feb. 27, it reported a profit of $30.6 million, or 48 cents a share, up from $26.3 million, or 42 cents, a year earlier. Revenue jumped 12.4% to $395.5 million.

The company in January had forecast earnings of 43 cents to 47 cents a share on revenue of $384 million to $396 million.

Gross margin fell to 45.3% from 46.5%.

-By David Benoit, Dow Jones Newswires; 212-416-2458; david.benoit@dowjones.com

(Nathan Becker contributed to this article.)

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