Grainger (GWW) Q4 Earnings, Revenues Beat on Higher Volumes

Zacks Equity Research Published on January 24, 2018

W.W. Grainger, Inc.’s (GWW - Free Report) fourth-quarter 2017 adjusted earnings per share of $2.94 came in higher than the prior-year figure of $2.45 by 20%. Further, earnings beat the Zacks Consensus Estimate of $2.18 by wide margin of 35%. The company witnessed strong volumes in its U.S. business driven by strategic pricing initiatives as well as an improving demand environment. Grainger’s shares gained 12.71% in pre-market trading.

Including one-time items such as restructuring charges and other charges, earnings came in at $2.63 per share in the reported quarter, up 160% from $1.01 in the year-ago quarter.

Operational Update

Grainger reported revenues of $2,632 million, up 6.5% from the prior-year quarter figure of $2,471 million, driven by an increase of 11 percentage point (pp) from volume growth. This was partly offset by a decline of 3 pp in price and 1 pp from the divestiture of a specialty business in the United States in mid-July. The figure also beat the Zacks Consensus Estimate of $2,568 million. There were 63 selling days in the reported quarter, same as in fourth-quarter 2016.

Cost of sales increased 8.8% year over year to $1,611 million. Gross profit increased 3% to $1,021 million from $990 million recorded in the year-ago quarter. Gross margin contracted 130 basis points (bps) to 38.8%.

Grainger’s adjusted operating income in the quarter increased 4% to $285 million from $275 million recorded in the prior-year quarter. Adjusted operating margin fell 30 bps to 10.8% in the quarter from 11.1% in the year-earlier quarter.

W.W. Grainger, Inc. Price, Consensus and EPS Surprise

In the past six months, Grainger outperformed the industry with respect to price performance. The stock gained 56.6%, compared with industry’s growth of 27.7%.

Zacks Rank

Grainger currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector are Deere & Company (DE - Free Report) , H&E Equipment Services, Inc. (HEES - Free Report) and Caterpillar Inc. (CAT - Free Report) . While Deere and H&E Equipment sport a Zacks Rank #1 (Strong Buy), Caterpillar carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere has a long-term earnings growth rate of 8.2%. Its shares have rallied 32% in the past year.

H&E Equipment Services has a long-term earnings growth rate of 18.6%. The company’s shares have appreciated 82.8% in a year.

Caterpillar has a long-term earnings growth rate of 10.3%. The stock has gained 48% in a year’s time.

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