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MSA Safety (MSA +0.00%) continued to face the same headwinds in the second quarter that it battled in recent quarters. However, its financial results are improving because its strategic investments are paying big dividends. That said, the company is not about to declare a win. Instead, it remains focused on making the investments needed so it can capture more market share, increase its margins, and create value for investors.
Metric |
Q2 2016 Actuals |
Q2 2015 Actuals |
Growth (YOY) |
---|---|---|---|
Revenue |
$296.0 million |
$287.0 million |
3.1% |
Adjusted earnings |
$30.1 million |
$25.3 million |
19% |
Adjusted earnings per share |
$0.79 |
$0.67 |
17.9% |
YOY = year over year. Data source: MSA Safety.
A trio of catalysts drove MSA Safety's earnings growth.
As CEO William Lambert, commenting on the quarter in the company's earnings press release, said:
Our quarterly results reflect strong returns on several strategic investments we've made to drive profitable growth. While we continued to see weak conditions in sales of certain products associated with energy and industrial related end-markets, our investments in new product development, strategic acquisitions and restructuring programs allowed us to recognize earnings growth of 21% on 3% revenue growth.
Lambert notes that MSA Safety's investments are driving results. The company's restructuring program, in particular, is having an impact on the bottom line. Nearly half of its earnings growth came from the drop in SG&A expenses, which is why earnings grew much faster than revenue.
MSA Safety plans to continue making strategic investments to offset the challenges it is currently facing. That said, one of the challenging end markets, energy, could soon start to turn. Dave Lesar, CEO of oil-field service giant Halliburton (HAL +0.01%), said this week that "we believe that the North American [energy market] has turned." Fueling this outlook is the belief that the U.S. rig count has bottomed, which the Halliburton CEO suggests will lead to a recovery in oil field activities. The implication for MSA Safety is that it will turn around the sluggish sales of its safety equipment to energy market end-users.