W.W. Grainger, Inc.’s (GWW Quick QuoteGWW - Free Report) second-quarter 2018 adjusted earnings per share of $4.37 improved 9% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.78 by a significant margin of 16%. Grainger’s stellar second-quarter performance was driven by higher sales, operating expense leverage, lower tax rate and share count.

 

Including one-time items, such as restructuring charges and other charges, earnings came in at $4.16 per share in the reported quarter, soaring 149% from $1.67 recorded in the year-ago quarter.

 

Grainger reported revenues of $2,860 million, up 9% from the prior-year quarter figure of $2,615 million. This was driven by an increase of 9 percentage point (pp) from volume growth, 1 pp from volume and 1 pp from foreign exchange, partially offset by a decline of 1 pp from the divestiture of a specialty business. The revenue figure also beat the Zacks Consensus Estimate of $2,820 million.

 

 

Grainger’s adjusted operating income in the reported quarter increased 23% to $359 million from $291 million recorded in the prior-year quarter aided by higher sales and strong operating expense leverage.  Adjusted operating margin expanded 150 bps to 12.6% in the quarter from 11.1% in the year-earlier quarter.

 

 

Grainger had cash and cash equivalents of $312 million at the end of second-quarter 2018 compared with $327 million at the end of 2017. Cash provided by operating activities increased to $394 million in the first half of fiscal 2018 compared with $372 million in the prior-year comparable period.

 

Long-term debt was $2.21 billion as of Jun 30, 2018, compared with $2.25 billion as of Dec 31, 2017. During the second quarter, the company returned $111 million in cash to shareholders through $83 million in dividends and $28 million to buy back 96,000 shares.

 

 

Backed by the quarter’s performance, Grainger raised 2018 sales and earnings per share guidance. The company now expects sales to be up 5.5-8.5% compared with the prior guidance of 5-8%. Further, the outlook for earnings per share is now $15.05-$16.05, from the prior band of $14.30-$15.30.

 

 

 

Over the past year, Grainger outperformed the industry with respect to price performance. The stock has gained 75% compared with 49% growth registered by the industry.

 

 

Grainger carries a Zacks Rank #2 (Buy).

 

Other top-ranked stocks in the same space include Actuant Corporation , DMC Global Inc. (BOOM Quick QuoteBOOM - Free Report) and Chart Industries, Inc. (GTLS Quick QuoteGTLS - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Actuant has a long-term earnings growth rate of 15.6%. Its shares have gained 17% over the past year.

 

DMC Global has a long-term earnings growth rate of 20%. The company’s shares have appreciated a whopping 269% in the past year.

 

Chart Industries has a long-term earnings growth rate of 26.9%. The stock has surged 91% in a year’s time.

 

 

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