MSA Safety (NYSE:MSA) was up against a tough comparable quarter because of several large orders last year. However, while revenue fell against last year's result, earnings surged thanks to the company's efforts to streamline its cost structure. Meanwhile, the company noted that the order improvement for industrial goods like hard hats that began late last year started gaining steam in early 2017, which suggests that even better days lie ahead.

MSA Safety's results: The raw numbers


Q1 2017

Q1 2016

Change (YOY)


$265.8 million

$279.3 million


Adjusted earnings

$22.3 million

$18.0 million


Adjusted EPS




Data source: MSA Safety.

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Image source: Getty Images.

What happened with MSA Safety this quarter?

Cost savings saved the day.

  • Revenue dipped nearly 5% versus last year's first quarter. However, the company recorded a large volume of new self-contained breathing apparatus (SCBA) orders in the year-ago quarter, which makes it a tough comparable. Meanwhile, foreign exchange headwinds also continued to weigh on the top line, which if adjusted for constant currencies would have only resulted in a 4% sales decline.
  • Because revenue in the SCBA segment slumped 12% year over year, it masked the fact that sales of portable gas detection equipment and industrial head protection rebounded sharply and were up 13% and 16%, respectively, year over year.
  • The improvement in sales of higher margin items, as well as a 4.1% decrease in selling, general, and administrative (SG&A) costs, enabled the company to offset weaker revenue and drive profitability higher.
  • MSA Safety also generated healthy cash flow from operating activities during the quarter, which was a stark reversal from the year-ago quarter when it used $11 million in cash. As a result, net debt is down $95 million from the year-ago quarter.

What management had to say

CEO William Lambert commented on the company's results, pointing out: "Our first-quarter performance reflects the leverage we are gaining from our streamlined cost structure and continued focus on improving profitability. Despite a difficult revenue comparison in self-contained breathing apparatus (SCBA) resulting from several large orders shipped in the first quarter of 2016, we realized adjusted earnings growth of 24%."

As Lambert noted, the company continues to face a pretty tough comparison after the initial rush of sales for its latest SCBA. That said, while the sales decline in that segment negatively impacted revenue, the company more than made up for that on the bottom line, thanks to a focus on streamlining costs and concentrating on efforts to improve profitability. These efforts include keeping a lid on SG&A costs, driving sales of higher margin items, and keeping its cost of products sold down through value engineering.

Looking forward

One of the other positives on the quarter was that the order improvement that started taking shape late last year in industrial products like hard hats and portable gas detectors continued to gain traction in the first quarter. That cyclical uptick, when combined with the company's focus on expanding margins and lowering costs, should drive profitable growth this year.

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