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Grainger (GWW) Q1 Earnings & Sales Beat, 2018 Outlook Up
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W.W. Grainger, Inc.’s (GWW - Free Report) first-quarter 2018 adjusted earnings per share of $4.18 surged around 45% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.41 by a wide margin of 23%.
Including one-time items, such as restructuring charges and other charges, earnings came in at $4.07 per share in the reported quarter, up 39% from $2.93 recorded in the year-ago quarter.
Grainger reported revenues of $2,766 million, up 9% from the prior-year quarter figure of $2,541 million. This was driven by an increase of 8 percentage point (pp) from volume growth, 2 pp from foreign exchange and 1 pp from higher sales of seasonal products, partially offset by a decline of 1 pp in price and 1 pp from the divestiture of a specialty business.
The revenue figure also beat the Zacks Consensus Estimate of $2,708 million. There were 64 selling days in the reported quarter, same as in first-quarter 2017.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
Grainger’s stellar first-quarter performance was backed by strong volumes in its U.S. business, driven by an improving demand environment. The company’s single channel and international businesses also contributed to this performance.
Operational Update
Cost of sales increased 10% year over year to $1,674 million. Gross profit increased 7% to $1,092 million from $1,019 million recorded in the year-ago quarter. Gross margin contracted 50 basis points (bps) to 39.5%.
Grainger’s adjusted operating income in the reported quarter increased 19% to $343 million from $287 million recorded in the prior-year quarter. Adjusted operating margin expanded 110 bps to 12.4% in the quarter from 11.3% in the year-earlier quarter.
Segment Performance
Revenues for the U.S. segment rose 8% year over year to $2,107.7 million, resulting from 9 pp increase from volume, 1 pp from intercompany sales and 1 pp from higher sales of seasonal products, partially offset by declines of 2 pp from price and 1 pp decline from the divestiture of a specialty business.
Revenues of $181.8 million from the Canada segment decreased 2% in U.S. dollars and 6% in local currency. The 6% decrease was due to a 13 pp decline in volume, partially offset by 7 pp from higher price. Revenues from Other businesses (which include Asia, Europe and Latin America) climbed 18% year over year to $588 million, primarily driven by 24% sales growth of single-channel online businesses.
Financial Position
Grainger had cash and cash equivalents of $302 million at the end of first-quarter 2018 compared with $326.9 million at the end of 2017. Cash provided by operating activities decreased to $146.9 million in the first quarter compared with $180.9 million in the prior-year quarter.
Long-term debt was $2.24 billion as of Mar 31, 2018, compared with $2.25 billion as of Dec 31, 2017. During the first quarter, the company returned $245 million in cash to shareholders through $72 million in dividends and $173 million to buy back 668,000 shares.
Guidance
Grainger raised its 2018 sales and earnings per share guidance. The company now expects sales to be up 5-8% compared to the prior guidance of 3-7%. Further, the outlook for earnings per share is now $14.30-$15.30, from the prior band of $12.95-$14.15. The company is poised to gain from strategic actions taken in the United States and Canada.
Share Price Performance
Over the past year, Grainger outperformed the industry with respect to price performance. The stock has gained 46% compared with 24% growth registered by the industry.
Ashtead Group has a long-term earnings growth rate of 15%. Its shares have surged 43%, over the past year.
Andritz has a long-term earnings growth rate of 5%. The company’s shares have rallied 16% over the past year.
DMC Global has a long-term earnings growth rate of 20%. The stock has appreciated 125% in a year’s time.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>
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Grainger (GWW) Q1 Earnings & Sales Beat, 2018 Outlook Up
W.W. Grainger, Inc.’s (GWW - Free Report) first-quarter 2018 adjusted earnings per share of $4.18 surged around 45% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.41 by a wide margin of 23%.
Including one-time items, such as restructuring charges and other charges, earnings came in at $4.07 per share in the reported quarter, up 39% from $2.93 recorded in the year-ago quarter.
Grainger reported revenues of $2,766 million, up 9% from the prior-year quarter figure of $2,541 million. This was driven by an increase of 8 percentage point (pp) from volume growth, 2 pp from foreign exchange and 1 pp from higher sales of seasonal products, partially offset by a decline of 1 pp in price and 1 pp from the divestiture of a specialty business.
The revenue figure also beat the Zacks Consensus Estimate of $2,708 million. There were 64 selling days in the reported quarter, same as in first-quarter 2017.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
W.W. Grainger, Inc. Price, Consensus and EPS Surprise | W.W. Grainger, Inc. Quote
Grainger’s stellar first-quarter performance was backed by strong volumes in its U.S. business, driven by an improving demand environment. The company’s single channel and international businesses also contributed to this performance.
Operational Update
Cost of sales increased 10% year over year to $1,674 million. Gross profit increased 7% to $1,092 million from $1,019 million recorded in the year-ago quarter. Gross margin contracted 50 basis points (bps) to 39.5%.
Grainger’s adjusted operating income in the reported quarter increased 19% to $343 million from $287 million recorded in the prior-year quarter. Adjusted operating margin expanded 110 bps to 12.4% in the quarter from 11.3% in the year-earlier quarter.
Segment Performance
Revenues for the U.S. segment rose 8% year over year to $2,107.7 million, resulting from 9 pp increase from volume, 1 pp from intercompany sales and 1 pp from higher sales of seasonal products, partially offset by declines of 2 pp from price and 1 pp decline from the divestiture of a specialty business.
Revenues of $181.8 million from the Canada segment decreased 2% in U.S. dollars and 6% in local currency. The 6% decrease was due to a 13 pp decline in volume, partially offset by 7 pp from higher price. Revenues from Other businesses (which include Asia, Europe and Latin America) climbed 18% year over year to $588 million, primarily driven by 24% sales growth of single-channel online businesses.
Financial Position
Grainger had cash and cash equivalents of $302 million at the end of first-quarter 2018 compared with $326.9 million at the end of 2017. Cash provided by operating activities decreased to $146.9 million in the first quarter compared with $180.9 million in the prior-year quarter.
Long-term debt was $2.24 billion as of Mar 31, 2018, compared with $2.25 billion as of Dec 31, 2017. During the first quarter, the company returned $245 million in cash to shareholders through $72 million in dividends and $173 million to buy back 668,000 shares.
Guidance
Grainger raised its 2018 sales and earnings per share guidance. The company now expects sales to be up 5-8% compared to the prior guidance of 3-7%. Further, the outlook for earnings per share is now $14.30-$15.30, from the prior band of $12.95-$14.15. The company is poised to gain from strategic actions taken in the United States and Canada.
Share Price Performance
Over the past year, Grainger outperformed the industry with respect to price performance. The stock has gained 46% compared with 24% growth registered by the industry.
Zacks Rank & Other Key Picks
Grainger carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the same space include Ashtead Group plc (ASHTY - Free Report) , Andritz AG (ADRZY - Free Report) and DMC Global Inc. (BOOM - Free Report) . While Ashtead Group flaunts a Zacks Rank #1 (Strong Buy), Andritz and DMC Global carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ashtead Group has a long-term earnings growth rate of 15%. Its shares have surged 43%, over the past year.
Andritz has a long-term earnings growth rate of 5%. The company’s shares have rallied 16% over the past year.
DMC Global has a long-term earnings growth rate of 20%. The stock has appreciated 125% in a year’s time.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>