W.W. Grainger, Inc. GWW reported fourth-quarter 2019 adjusted earnings per share (EPS) of $3.88, down 2% year over year primarily owing to a higher tax rate in the reported quarter. The bottom line also missed the Zacks Consensus Estimate of $4.03, resulting in a negative surprise of 4%.
Including one-time items, such as restructuring and other charges, earnings came in at $1.88 in the reported quarter. The figure plunged 49% from the year-ago quarter’s $3.68.
Grainger’s revenues jumped 3% to $2,847 million from the prior-year quarter figure of $2,763 million. This upside was driven by an increase of 3.5 percentage point (pp) in volume and unfavorable price impact of 0.5%. The top line surpassed the Zacks Consensus Estimate of $2,845 million.
Adjusted cost of sales increased 4% year over year to $1,766 million. Gross profit was up 1.5% year over year to $1,081 million. Gross margin contracted 38.0% in the quarter from 38.5% in the year-ago quarter.
Grainger’s adjusted operating income in the fourth quarter dipped 1% to $307 million from the $310 million in the prior-year quarter. Adjusted operating margin contracted 40 bps year over year to 10.8% in the quarter.
The company had cash and cash equivalents of $360 million at the end of 2019, down from $538 million at 2018 end. Cash provided by operating activities decreased to $1,042 million in the fourth quarter from the year-ago quarter figure of $1,057 million.
Long-term debt was $1,914 million as of Dec 31, 2019, compared with $2,090 million as of Dec 31, 2018. The company returned $1,028 million to shareholders through $328 million in dividends and $700 million to buy back around 2.4 million shares in 2019.
Grainger reported adjusted earnings per share of $17.29 in 2019, up 4% from the prior-year reported figure of $16.70. However, earnings missed the Zacks Consensus Estimate of $17.46. Including one-time items, the bottom line came in at $15.32, up 12% from $13.73 reported in 2018.
Sales rose 2.4% year over year to around $11.5 billion from the prior-year figure of $11.2 billion. The top line came in line with the Zacks Consensus Estimate.
Grainger initiated guidance for full-year 2020. Operating margin is forecasted in the band of 11.7-12.5%. The company expects EPS of $17.75-$19.25. The mid-point of the guidance range indicates year-over-year growth of 7% from 2018. Gross margin is estimated between 37.2% and 37.8%, and revenue growth is projected between 3.5% and 6.5%.
Over the past year, Grainger’s shares have gained 10.9%, against the
industry’s decline of 2.2%. Zacks Rank and Stocks to Consider
Grainger currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are SPX FLOW, Inc.
FLOW, DXP Enterprises, Inc. DXPE and Cintas Corporation ( CTAS Quick Quote CTAS - Free Report) . While SPX FLOW flaunts a Zacks Rank #1 (Strong Buy), DXP Enterprises and Cintas carry a Zacks Rank #2 (Buy). You can see . the complete list of today's Zacks #1 Rank stocks here
SPX FLOW has a projected earnings growth rate of 9.1% for 2020. The company’s shares have gained 37.6% in the past year.
DXP Enterprises has an estimated earnings growth rate of 10.5% for the ongoing year. In a year’s time, the stock has appreciated 10%.
Cintas has an expected earnings growth rate of 15.6% for the current year. The stock has surged 49.5% over the past year.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>