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Grainger (GWW) to Report Q2 Earnings: What's in the Offing?

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W.W. Grainger, Inc. (GWW - Free Report) is expected to report second-quarter 2019 results on Apr 24, before the opening bell. Grainger has an impressive earnings surprise history having surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 8.37%.

Which Way Are Q2 Estimates Headed?

The Zacks Consensus Estimate for second-quarter revenues is pegged at $2.99 billion, indicating an improvement of 4.46% from the year-ago quarter. The same for earnings stands at $4.65, suggesting growth of 6.41% from the prior-year reported figure. Notably, the consensus mark has remained unchanged over the past 30 days.

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


 

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

W.W. Grainger, Inc. price-eps-surprise | W.W. Grainger, Inc. Quote

Shares of the company have plunged 21.2% in a year, compared with the industry’s decline of 15.0%. Will the upcoming earnings release provide a boost to Grainger’s stock? Let’s take a look.
 

Factors at Play

Grainger is well poised to benefit from its efforts to strengthen relationship with customers in the United States. The company has been witnessing increasing volumes across all customer groups lately. In fact, volume and the number of transactions per customer are rising and the company is also witnessing increasing traffic in all branches. Grainger’s e-commerce sales continue to grow as the company remains focused on improving end-to-end customer experience by making investments in its e-commerce and digital capabilities. This is likely to aid the upcoming quarterly results.

The Zacks Consensus Estimate for Grainger’s quarterly sales in the Unites States is $2.3 billion, suggesting year-over-year growth of 4%. The Zacks Consensus Estimate for adjusted operating income of the segment is pegged at $375 million for the to-be-reported quarter, indicating year-over-year improvement of 5%.

Volumes have lately been down in the Canada segment.  Per the Zacks Consensus Estimates, net sales in the Canada segment will likely drop around 17% to $147 million in the quarter under review. Grainger has successfully concluded Canada business restructuring, which is an attractive market. The company has been focused on improving margins and reducing cost structure in the Canada operations to drive profitable growth. The segment is likely to deliver break-even results against the operating loss of $2 million reported in second-quarter 2018.

The Zacks Consensus Estimate for the Other Businesses segment is $678 million, indicating an improvement of 9% from the prior-year quarter.

However, Grainger’s results are anticipated to be affected by input cost inflation and foreign exchange headwinds. The company is also plagued with rising freight costs. Additionally, Grainger’s margin performance will be impacted by rising expenses owing to investments in digital marketing capabilities. Nevertheless, the company’s cost saving initiatives will buoy margins.

Earnings Whispers

Our proven model does not show that Grainger is likely to beat earnings estimates this 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Grainger’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: Grainger currently has a Zacks Rank #4 (Sell). Notably, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

John Bean Technologies Corporation (JBT - Free Report) has an Earnings ESP of +1.85% and a Zacks Rank of 1. The stock has appreciated 28% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

AptarGroup, Inc. (ATR - Free Report) has a Zacks Rank #2 and an Earnings ESP of +0.88%. The stock has gained 31% over the past year.

Sonoco Products Company (SON - Free Report) , a Zacks Ranked #2 stock, has an Earnings ESP of +3.09%. The stock has moved up 20% in a year’s time.

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