As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the industrial distributors industry, including GMS (NYSE: GMS) and its peers.
Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Distributors that boast a reliable selection of products–everything from hardhats and fasteners for jet engines to ceiling systems–and quickly deliver goods to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is still a real threat, forcing investment in omnichannel capabilities to better interact with customers. Additionally, distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.
The 26 industrial distributors stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.5% while next quarter’s revenue guidance was 2.6% below.
In light of this news, share prices of the companies have held steady as they are up 4.3% on average since the latest earnings results.
GMS (NYSE: GMS)
Founded in 1971, GMS (NYSE: GMS) distributes specialty building materials including wallboard, ceilings, and insulation products, to the construction industry.
GMS reported revenues of $1.41 billion, down 2.4% year on year. This print exceeded analysts’ expectations by 1.2%. Overall, it was a satisfactory quarter for the company with a narrow beat of analysts’ EBITDA estimates.
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $109.97.
Is now the time to buy GMS? Access our full analysis of the earnings results here, it’s free.
Best Q2: Transcat (NASDAQ: TRNS)
Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.
Transcat reported revenues of $76.42 million, up 14.6% year on year, outperforming analysts’ expectations by 5.7%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 7.2% since reporting. It currently trades at $72.80.
Is now the time to buy Transcat? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Watsco (NYSE: WSO)
Originally a manufacturing company, Watsco (NYSE: WSO) today only distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.
Watsco reported revenues of $2.06 billion, down 3.6% year on year, falling short of analysts’ expectations by 7.2%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.
Watsco delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 15.9% since the results and currently trades at $390.65.
Read our full analysis of Watsco’s results here.
DistributionNOW (NYSE: DNOW)
Spun off from National Oilwell Varco, DistributionNOW (NYSE: DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
DistributionNOW reported revenues of $628 million, flat year on year. This result topped analysts’ expectations by 2.6%. It was a stunning quarter as it also produced a beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
The stock is up 1.8% since reporting and currently trades at $15.50.
Read our full, actionable report on DistributionNOW here, it’s free.
United Rentals (NYSE: URI)
Owning the largest rental fleet in the world, United Rentals (NYSE: URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.
United Rentals reported revenues of $3.94 billion, up 4.5% year on year. This number surpassed analysts’ expectations by 0.8%. Overall, it was a strong quarter as it also logged an impressive beat of analysts’ adjusted operating income estimates and full-year EBITDA guidance slightly topping analysts’ expectations.
The stock is up 17.4% since reporting and currently trades at $938.10.
Read our full, actionable report on United Rentals here, it’s free.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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