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W.W. Grainger (GWW) Up 5.4% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for W.W. Grainger, Inc. (GWW - Free Report) . Shares have added about 5.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is GWW due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Grainger’s 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.
Operational Update
Adjusted cost of sales increased 11% year over year to $1,748 million. Adjusted gross profit climbed 7% to $1,112 million from $1,042 million recorded in the year-ago quarter. Gross margin contracted 100 basis points (bps) to 38.9%.
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.
Financial Position
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.
Guidance
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
Currently, GWW has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise GWW has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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W.W. Grainger (GWW) Up 5.4% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for W.W. Grainger, Inc. (GWW - Free Report) . Shares have added about 5.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is GWW due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
W.W. Grainger, Inc. Price and Consensus
W.W. Grainger, Inc. Price and Consensus | W.W. Grainger, Inc. Quote
VGM Scores
Currently, GWW has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise GWW has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.