Based on weather-driven sluggishness throughout January and February, analysts expect fiscal second-quarter EPS below consensus of $0.86. The midpoint of management’s EPS guidance ($0.83-$0.87) assumed a return to October/November sales growth (5%) in January and February after a slowdown in December (3%). Considering peer results and our surveys, we now believe January organic growth was 3% and February was 5%.

Following MSC’s fiscal first-quarter results, shares rallied based on accelerating monthly sales trends and a more optimistic management tone. The MBI index has been above 50 in four of the past five months. Index results were particularly strong in January and February, indicating demand could bounce back this spring. In our experience, the pace of sales growth reacceleration for MSC usually surprises to the upside when business conditions are improving off easy comparisons. According to Gardner, machine tool unit sales could rise 5% in 2014, with growth weighted to the second half. Gardner points to rising capital goods orders, stronger durable goods production, rising capacity utilization, and improved sentiment from survey respondents.