MSA Safety Inc. (NYSE:MSA) reported mixed first-quarter results after the market closed on Monday. On the surface it was a subpar report, as revenue slumped and earnings missed estimates. However, upon closer inspection, the quarter wasn't all that bad, as the biggest culprit was the strong U.S. dollar.
A look at the numbers
Reported revenue at MSA Safety was $257 million, down 3% over the prior year's first quarter. That fell well short of expectations, as analysts estimated that the company would generate $278.5 million in revenue. However, when revenue is adjusted for local currencies, it grew by 4%, which was driven by 7% growth in the company's core products. Leading the way was strong shipping activity in self-contained breathing apparatus (SCBA), fire helmets, and fixed gas and flame detection, which helped to offset weakness in products sold to energy markets.
Foreign currencies also had an impact on income, as net income dropped from $14 million, or $0.38 per share in last year's first quarter to just $9.6 million, or $0.26 per share. However, after stripping out this impact, as well as other impacts, adjusted earnings came in at $16 million, or $0.42 per share. That was just a penny less than the company earned in the first quarter of last year. However, it was a full dime less than analysts were expecting to see this quarter. The culprit here was the challenging energy market, as sales of Portable Gas Detection slipped 4%, while sales of Industrial Head Protection dropped 7%, with even bigger sales drops in the North American marketplace.
A look ahead
One of the most encouraging signs in the quarter was the robust growth in SCBA sales. After adjusting for local currencies, SCBA sales were up 27%, driven by very strong North American sales that were up 62%. This is due to meaningful order activity of the company's revolutionary G1 SCBA, which just started shipping in the fourth quarter of last year.
MSA's global backlog for SCBA is already up to $82 million, which is more than double the level from last year. This strong growth and backlog has the company very optimistic for the second quarter, as it sees a further ramp up of shipping activity for this new product. In addition, the company is seeing continued success in Europe, which should provide some more momentum for the company. Combined, these two catalysts are expected to drive solid local currency revenue growth, which is expected to help mitigate some of the headwinds from currency and energy.
MSA Safety's report wasn't great, but it wasn't awful, either. The company is clearly being affected by some tough headwinds, as energy and currencies weighed on results. However, SCBA sales were strong, and that momentum is expected to continue in the year ahead. That should drive decent growth in 2015, which has some upside if its headwinds begin to subside.