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Grainger (GWW) to Report Q4 Earnings: What's in Store?
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W.W. Grainger, Inc. (GWW - Free Report) is scheduled to release fourth-quarter 2017 financial numbers before the opening bell on Jan 24. Its fourth-quarter earnings are likely to dip year over year due to higher expenses despite a rise in revenues.
In the last reported quarter as well, the distributor of maintenance, repair, and operating (MRO) supplies; and other related products and services reported a dip of 5% in earnings to $2.90 per share while revenues edged up 1.5%. However, both earnings and revenues managed to beat the Zacks Consensus Estimates.
The stock has struggled so far this year due to multiple headwinds, underperforming the industry it belongs to. The stock has tanked 6.8%, wider than the industry’s decline of 3.9%.
Will the upcoming earnings release exert more pressure on the stock? Notably, Grainger delivered an earnings beat in three of the trailing four quarters, with an average positive earnings surprise of 4.23%.
Our proven model does not conclusively predict an earnings beat in the third quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below:
Zacks ESP: Grainger has an Earnings ESP of +3.76%. This is because the Most Accurate estimate of $2.27 is pegged higher than the Zacks Consensus Estimate of $2.18. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Grainger’s Zacks Rank #5 (Strong Sell) lowers the predictive power of ESP. It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
While volumes will improve driven by price initiatives and improved demand environment, the bottom line is likely to face the brunt of elevated expenses. Expenses in the fourth quarter will be higher due to normal seasonality and also due to the incremental investments in the single channel online business and digital marketing.
The Zacks Consensus Estimate for total sales of $2.6 billion indicates 2% growth from the prior-year quarter. However, growth in the top line will not translate to growth in earnings due to higher expenses as evident from drop of 11% in earnings projected by the Zacks Consensus model. The Zacks Consensus Estimate for earnings for the fourth quarter is currently pegged at $2.18 compared with $2.45 reported in fourth-quarter 2016.
Even though the company remains focused on improving gross margins and reducing cost structure in Canada, the segment continues to be challenged due to higher expenses. Further, given that oil and gas and energy exposure in Canada is very high, the segment remains affected by fluctuation oil and gas prices. Per the Zacks Consensus Estimates, net sales in the Canada segment will rise 6% to around $191 million in the fourth quarter. However, due to the abovementioned reasons, the segment will likely report an adjusted operating loss of $11.4 million, wider than the operating loss of $10.7 million in fourth-quarter 2016.
Per the Zacks Consensus Estimate, net sales in the Unites States will increase 2% year over year to $1,935 million. The segment will report 12% drop in adjusted operating income to $263 million due to higher expenses.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as according to our model they have the right combination of elements to post an earnings beat this quarter.
Briggs & Stratton Corporation with an Earnings ESP of +5.64% and a Zacks Rank #1.
Caterpillar, Inc. (CAT - Free Report) , with an Earnings ESP of +8.62% and a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
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Grainger (GWW) to Report Q4 Earnings: What's in Store?
Zacks ESP: Grainger has an Earnings ESP of +3.76%. This is because the Most Accurate estimate of $2.27 is pegged higher than the Zacks Consensus Estimate of $2.18. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
W.W. Grainger, Inc. Price and EPS Surprise | W.W. Grainger, Inc. Quote
Factors Likely at Play
While volumes will improve driven by price initiatives and improved demand environment, the bottom line is likely to face the brunt of elevated expenses. Expenses in the fourth quarter will be higher due to normal seasonality and also due to the incremental investments in the single channel online business and digital marketing.
The Zacks Consensus Estimate for total sales of $2.6 billion indicates 2% growth from the prior-year quarter. However, growth in the top line will not translate to growth in earnings due to higher expenses as evident from drop of 11% in earnings projected by the Zacks Consensus model. The Zacks Consensus Estimate for earnings for the fourth quarter is currently pegged at $2.18 compared with $2.45 reported in fourth-quarter 2016.
Even though the company remains focused on improving gross margins and reducing cost structure in Canada, the segment continues to be challenged due to higher expenses. Further, given that oil and gas and energy exposure in Canada is very high, the segment remains affected by fluctuation oil and gas prices. Per the Zacks Consensus Estimates, net sales in the Canada segment will rise 6% to around $191 million in the fourth quarter. However, due to the abovementioned reasons, the segment will likely report an adjusted operating loss of $11.4 million, wider than the operating loss of $10.7 million in fourth-quarter 2016.
Per the Zacks Consensus Estimate, net sales in the Unites States will increase 2% year over year to $1,935 million. The segment will report 12% drop in adjusted operating income to $263 million due to higher expenses.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as according to our model they have the right combination of elements to post an earnings beat this quarter.
Deere & Company (DE - Free Report) , with an Earnings ESP of +5.64% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Briggs & Stratton Corporation with an Earnings ESP of +5.64% and a Zacks Rank #1.
Caterpillar, Inc. (CAT - Free Report) , with an Earnings ESP of +8.62% and a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
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