MSC Industrial Direct Co. Inc. ( MSM ) shares rose on Tuesday after the company posted better-than-expected financial results for its fiscal third quarter of 2025.

Net sales slipped 0.8% year over year to $971.1 million but edged past the consensus estimate of $970.23 million.

The company reported adjusted earnings per share of $1.08, down 18.8% year over year, topping analysts’ expectations of $1.03.

Also Read: Top Wall Street Forecasters Revamp MSC Industrial Direct Expectations Ahead Of Q3 Earnings

Average daily sales also declined 0.8% primarily due to lower volumes and a roughly 10 basis points (bps) headwind from foreign exchange rates. These negative impacts were partially offset by an approximately 80 bps contribution from pricing and about 60 bps from acquisitions.

The company reported gross margin of 41.0%, up slightly from 40.9% a year ago primarily driven by favorable price/cost relationship.

Adjusted operating income fell 21.8% to $87.2 million, while the adjusted operating margin dropped to 9% from 11.4% in the same quarter last year.

As of May 31, MSC held $71.7 million in cash and equivalents. Operating cash flow for the first nine months of fiscal 2025 totaled $253.5 million, while free cash flow reached $182 million, 129% of net income.

The company repurchased about 117,000 shares during the quarter and has returned roughly $181 million to shareholders through dividends and buybacks since the beginning of the year.

Regarding the navigation of tariff impacts, MSC Industrial has a detailed breakdown of its Cost of Goods Sold (COGS) by country of origin. Over 50% of its COGS originates from U.S., providing a strong domestic base.

Europe and China each account for approximately 10% of COGS, while the rest of the world contributes less than 25%. Canada and Mexico each represent less than 3% of COGS.

This diversified sourcing strategy, with a significant portion from U.S., helps in mitigating potential tariff exposures.

“The fiscal third quarter included encouraging data points, such as core customer sequential improvement, continued momentum in our high-touch solutions and a building productivity pipeline. Looking longer term, we remain steadfast in our commitment to restoring performance consistent with our long-term objectives of growing to 400 basis points or more above the IP Index and expanding operating margins to the mid-teens,” commented Erik Gershwind, Chief Executive Officer.

MSC expects fourth-quarter average daily sales to range from a decline of 0.5% to a gain of 1.5%, with an adjusted operating margin of 8.5% to 9%.

For fiscal year 2025, the company expects a free cash flow conversion of ~120% and capital expenditures of ~$100 million-$110 million.

Price Action: MSM shares are trading higher by 3.49% at $87.99 at the last check Tuesday.

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