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W.W. Grainger (GWW - Analyst Report) has narrowed its earnings guidance for 2012 to a range of $10.55 to $10.75 per share from the previous view of $10.50-$10.80. The estimate excludes reserve adjustment of 66 cents per share pertaining to settlement with the Department of Justice regarding a dispute with the General Services Administration and the United States Postal Service. The current Zacks Consensus Estimate for 2012 is $10.66.

Grainger reiterated that sales would grow within the band of 11%-12% in 2012. Earlier, while releasing its third-quarter 2012 results, the company trimmed its sales forecast to the range of 11%-12% from the previous range of 12%-14%. Grainger tweaked its sales expectation citing a weak economy.

For fourth-quarter 2012, Grainger expects sales to be within the range of 7% to 9%. It anticipates earnings to lie within $2.55-$2.75 per share. The Zacks Consensus Estimate for the fourth quarter is currently pegged at $2.59 per share.

Grainger also provided its outlook for 2013. It envisions sales to grow 2% to 8% and earnings to be in the range of $10.85-$12.00 per share. The corresponding Zacks Consensus Estimate for earnings is $11.98.

Grainger delivered a 6% year over year sales growth in October 2012. The growth was attributable to higher prices, volumes and sales of hurricane related products resulting from storms in Northeast U.S.

Daily sales growth in November is currently trending above the 6% level attained in October, boosted especially by higher sales in generators, heaters, electrical and assorted product categories supplied to the customers as part of the recovery effort made subsequent to the storm in Northeast U.S.

Grainger, however, expects the timings of the holidays (Christmas and New Year) to negatively impact sales growth in the fourth quarter. Additionally, a dearth in demand due to the ongoing global weakness will be headwind for the company on the next quarters.

Moreover, Grainger is investing significantly in product line expansion, sales force expansion, e-commerce, inventory services, distribution centers and international expansion and as a result margins are expected to remain under pressure.

Grainger, which belongs to the industry equipment wholesale industry, retains a Zacks #3 Rank (Hold). WESCO International Inc. (WCC - Analyst Report) and Applied Industrial Technologies, Inc. (AIT - Snapshot Report) both retain a Zacks #3 Rank (Hold) in the same industry. We have a long-term Neutral recommendation on Grainger.
 

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