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Why Is W.W. Grainger (GWW) Down 9.1% 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 lost about 9.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is W.W. Grainger due for a breakout? 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 drivers.
Grainger Q2 Earnings & Revenues Lag Estimates, Up Y/Y
Grainger posted second-quarter 2019 adjusted earnings per share (EPS) of $4.64, up 6% year over year. Further, earnings missed the Zacks Consensus Estimate of $4.65 by a whisker. Growth in operating earnings and lower average shares outstanding drove Grainger’s quarterly performance.
Including one-time items, such as restructuring and other charges, earnings came in at $4.67 in the reported quarter. The figure improved 12% from $4.16 recorded in the year-ago quarter.
Grainger’s revenues inched up 1% to $2,893 million from the prior-year quarter’s $2,861 million. This upside was driven by an increase of 1.5 percentage point (pp) in volume and 0.5 pp increase in price. However, revenues missed the Zacks Consensus Estimate of $2,988 million.
Operational Update
Cost of sales increased 1.3% year over year to $1,772 million. Gross profit inched up to $1,121 million from $1,112 million recorded in the year-earlier quarter. Gross margin shrunk to 38.7% in the quarter from 38.9% reported in the year-ago quarter.
Grainger’s adjusted operating income in the April-June quarter increased 5% to $377 million from $359 million witnessed in the prior-year quarter. Adjusted operating margin expanded 50 bps year-over-year to 13% in the quarter.
Financial Position
The company had cash and cash equivalents of $315 million at the end of the second quarter compared with $313 million at the end of the prior-year quarter. Cash provided by operating activities increased to $323 million for the quarter from the year-ago quarter’s $248 million.
Long-term debt was $2,080 million as of Jun 30, 2019, compared with $2,090 million as of Dec 31, 2018. The company returned $352 million to shareholders through $87 million in dividends and $265 million to buy back around 970,000 shares in the reported quarter.
Outlook
Grainger has maintained its guidance for full-year 2019. Operating margin is forecast in the band of 12.2-13.0%. The company expects EPS of $17.10-$18.70. Gross margin is estimated between 38.1% and 38.7%. Nevertheless, the company lowered its revenue guidance due to a softer demand environment, and weaker performance at AGI and Cromwell. As a result, revenue growth is projected between 2% and 5%, as against the prior estimate of 4-8.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, W.W. Grainger has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, 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) Down 9.1% Since Last Earnings Report?
A month has gone by since the last earnings report for W.W. Grainger (GWW - Free Report) . Shares have lost about 9.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is W.W. Grainger due for a breakout? 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 drivers.
Grainger Q2 Earnings & Revenues Lag Estimates, Up Y/Y
Grainger posted second-quarter 2019 adjusted earnings per share (EPS) of $4.64, up 6% year over year. Further, earnings missed the Zacks Consensus Estimate of $4.65 by a whisker. Growth in operating earnings and lower average shares outstanding drove Grainger’s quarterly performance.
Including one-time items, such as restructuring and other charges, earnings came in at $4.67 in the reported quarter. The figure improved 12% from $4.16 recorded in the year-ago quarter.
Grainger’s revenues inched up 1% to $2,893 million from the prior-year quarter’s $2,861 million. This upside was driven by an increase of 1.5 percentage point (pp) in volume and 0.5 pp increase in price. However, revenues missed the Zacks Consensus Estimate of $2,988 million.
Operational Update
Cost of sales increased 1.3% year over year to $1,772 million. Gross profit inched up to $1,121 million from $1,112 million recorded in the year-earlier quarter. Gross margin shrunk to 38.7% in the quarter from 38.9% reported in the year-ago quarter.
Grainger’s adjusted operating income in the April-June quarter increased 5% to $377 million from $359 million witnessed in the prior-year quarter. Adjusted operating margin expanded 50 bps year-over-year to 13% in the quarter.
Financial Position
The company had cash and cash equivalents of $315 million at the end of the second quarter compared with $313 million at the end of the prior-year quarter. Cash provided by operating activities increased to $323 million for the quarter from the year-ago quarter’s $248 million.
Long-term debt was $2,080 million as of Jun 30, 2019, compared with $2,090 million as of Dec 31, 2018. The company returned $352 million to shareholders through $87 million in dividends and $265 million to buy back around 970,000 shares in the reported quarter.
Outlook
Grainger has maintained its guidance for full-year 2019. Operating margin is forecast in the band of 12.2-13.0%. The company expects EPS of $17.10-$18.70. Gross margin is estimated between 38.1% and 38.7%. Nevertheless, the company lowered its revenue guidance due to a softer demand environment, and weaker performance at AGI and Cromwell. As a result, revenue growth is projected between 2% and 5%, as against the prior estimate of 4-8.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, W.W. Grainger has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, W.W. Grainger has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.