Back to top

Analyst Blog

We expect W.W. Grainger Inc. (GWW - Analyst Report) to beat expectations when it reports second-quarter 2013 results on July 17.

Why a Likely Positive Surprise?

Our proven model shows that this distributor of facilities maintenance, repair and operating supplies is likely to beat earnings because it has the two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.68%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Grainger’s Zacks Rank # 3 (Hold) and +0.68% ESP makes us reasonably confident of a positive earnings beat on July 17.

What is Driving the Better Than Expected Earnings?

Grainger’s focus on expanding its product offerings and strengthening its businesses across all operating regions, mainly in Asia and Latin America, as well as continued investment in e-commerce - its most profitable channel, will be instrumental in driving a positive earnings surprise in the upcoming quarter following a positive surprise of 7.69% in the last quarter.

Furthermore, Grainger’s sound balance sheet, low debt level and cash flow characteristics allow the company to further invest in growth opportunities, raise dividends and reinvest capital through share repurchases. The company has been rewarding shareholders with consistent dividend hikes over the last 42 years, a record that only 3% of the S&P 500 companies can boast.

Other Stocks to Consider    

Grainger is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:

Gardner Denver Inc. , Earnings ESP of +3.18% and a Zacks Rank #2 (Buy).

Wesco Aircraft Holdings, Inc. (WAIR - Snapshot Report), Earnings ESP of +3.23% and a Zacks Rank # 3 (Hold).

Dover Corporation (DOV - Analyst Report) Earnings EPS of 0.78% and Zacks Rank # 3 (Hold).
 

Please login to Zacks.com or register to post a comment.