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Why Is W.W. Grainger (GWW) Up 7.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for W.W. Grainger (GWW - Free Report) . Shares have added about 7.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is W.W. Grainger due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Grainger Q3 Earnings Beat, Revenues Miss Estimates
Grainger’s 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, W.W. Grainger has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
W.W. Grainger has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is W.W. Grainger (GWW) Up 7.5% Since Last Earnings Report?
A month has gone by since the last earnings report for W.W. Grainger (GWW - Free Report) . Shares have added about 7.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is W.W. Grainger due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Grainger Q3 Earnings Beat, Revenues Miss Estimates
Grainger’s 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, W.W. Grainger has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
W.W. Grainger has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.