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Grainger (GWW) Q3 Earnings Beat, Revenues Miss Estimates
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W.W. Grainger, Inc.’s (GWW - Free Report) third-quarter 2018 adjusted earnings per share of $4.19 improved 44% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.96 by a margin of around 6%. Stellar sales, operating expense leverage and a lower tax rate drove Grainger’s improved third-quarter performance.
Including one-time items, such as restructuring charges and other charges, earnings came in at $1.82 per share in the reported quarter, down 35% from $2.79 recorded in the year-ago quarter.
Grainger reported revenues of $2,831 million, up 7% from the prior-year quarter figure of $2,636 million. This was driven by an increase of 7 percentage point (pp) from volume growth and 1 pp increase in price, partially offset by 1 pp a decline from foreign exchange. The revenue figure missed the Zacks Consensus Estimate of $2,849 million. Shares of Grainger fell nearly 8% in pre-market trading following the third-quarter earnings release.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
Adjusted cost of sales increased 8% year over year to $1,752 million. Adjusted gross profit climbed 6% to $1,079 million from $1,018 million recorded in the year-earlier quarter. Gross margin shrunk 50 basis points (bps) to 38.1%.
Grainger’s adjusted operating income in the Sep-end quarter increased 15% to $332 million from $287 million recorded in the prior-year quarter. Adjusted operating margin expanded 80 bps to 11.7% in the quarter from 10.9% in the year-earlier quarter.
Financial Position
Grainger had cash and cash equivalents of $517 million at the end of the third quarter compared with $327 million at the end of 2017. Cash provided by operating activities increased to $743 million during the nine-month period ended Sep 30, 2018, compared with $721 million reported in the comparable period last year.
Long-term debt was $2.2 billion as of Sep 30, 2018, compared with $2.3 billion as of Dec 31, 2017. During the Jul-Sep quarter, the company returned $159 million in cash to shareholders through $77 million in dividends and $82 million to buy back 243,000 shares.
Share Price Performance
Over the past year, Grainger has outperformed the industry with respect to price performance. The stock has gained around 74% compared with 33% growth registered by the industry.
HD Supply has a long-term earnings growth rate of 15.7%. Its shares have gained 12% over the past year.
AptarGroup has a long-term earnings growth rate of 20%. The company’s shares have rallied 15% in the past year.
Cintas Corporation has a long-term earnings growth rate of 12%. The stock has climbed 22% in a year’s time.
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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) Q3 Earnings Beat, Revenues Miss Estimates
W.W. Grainger, Inc.’s (GWW - Free Report) third-quarter 2018 adjusted earnings per share of $4.19 improved 44% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.96 by a margin of around 6%. Stellar sales, operating expense leverage and a lower tax rate drove Grainger’s improved third-quarter performance.
Including one-time items, such as restructuring charges and other charges, earnings came in at $1.82 per share in the reported quarter, down 35% from $2.79 recorded in the year-ago quarter.
Grainger reported revenues of $2,831 million, up 7% from the prior-year quarter figure of $2,636 million. This was driven by an increase of 7 percentage point (pp) from volume growth and 1 pp increase in price, partially offset by 1 pp a decline from foreign exchange. The revenue figure missed the Zacks Consensus Estimate of $2,849 million. Shares of Grainger fell nearly 8% in pre-market trading following the third-quarter earnings release.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
W.W. Grainger, Inc. Price, Consensus and EPS Surprise | W.W. Grainger, Inc. Quote
Operational Update
Adjusted cost of sales increased 8% year over year to $1,752 million. Adjusted gross profit climbed 6% to $1,079 million from $1,018 million recorded in the year-earlier quarter. Gross margin shrunk 50 basis points (bps) to 38.1%.
Grainger’s adjusted operating income in the Sep-end quarter increased 15% to $332 million from $287 million recorded in the prior-year quarter. Adjusted operating margin expanded 80 bps to 11.7% in the quarter from 10.9% in the year-earlier quarter.
Financial Position
Grainger had cash and cash equivalents of $517 million at the end of the third quarter compared with $327 million at the end of 2017. Cash provided by operating activities increased to $743 million during the nine-month period ended Sep 30, 2018, compared with $721 million reported in the comparable period last year.
Long-term debt was $2.2 billion as of Sep 30, 2018, compared with $2.3 billion as of Dec 31, 2017. During the Jul-Sep quarter, the company returned $159 million in cash to shareholders through $77 million in dividends and $82 million to buy back 243,000 shares.
Share Price Performance
Over the past year, Grainger has outperformed the industry with respect to price performance. The stock has gained around 74% compared with 33% growth registered by the industry.
Zacks Rank & Other Key Picks
Grainger carries a Zacks Rank #2 (Buy).
Other similarly-ranked stocks in the same space include HD Supply Holdings, Inc. , AptarGroup, Inc. (ATR - Free Report) and Cintas Corporation (CTAS - Free Report) . You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
HD Supply has a long-term earnings growth rate of 15.7%. Its shares have gained 12% over the past year.
AptarGroup has a long-term earnings growth rate of 20%. The company’s shares have rallied 15% in the past year.
Cintas Corporation has a long-term earnings growth rate of 12%. The stock has climbed 22% 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 >>