Post Earnings Coverage as Grainger’s Quarterly Sales Grew 1%; Missed Market Estimates

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Upcoming AWS Coverage on WESCO International Post-Earnings Results

LONDON, UK / ACCESSWIRE / April 21, 2017 / Active Wall St. announces its post-earnings coverage on W.W. Grainger, Inc. (NYSE: GWW). The Company released its first quarter fiscal 2017 results on April 18, 2017. The supplier of maintenance, repair, and operating products also lowered its sales and earnings outlook. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of W.W. Grainger’s competitors within the Industrial Equipment Wholesale space, WESCO International, Inc. (NYSE: WCC), announced on March 08, 2017, that it plans to hold its Q1 2017 earnings conference call on Thursday, April 27 at 11:00 a.m. ET. AWS will be initiating a research report on WESCO International in the coming days.

Today, AWS is promoting its earnings coverage on GWW; touching on WCC. Get our free coverage by signing up to: http://www.activewallst.com/register/.

Earnings Reviewed

For the three months ended March 31, 2017, Grainger reported that sales of $2.54 billion increased 1% versus sales of $2.15 billion in Q1 2016, driven by 5% increase from volume growth, but partially offset by 3% decline in price and 1% decline from lower sales of seasonal products. The Company’s sales numbers came in below analysts’ consensus of $2.56 billion.

Grainger reported operating earnings of $295 million for Q1 2017 down 7% versus $317 million in Q1 2016. The decline was driven primarily by lower gross profit from the strategic pricing initiatives in the United States.

For Q1 2017, Grainger reported net earnings of $175 million, down 6% versus $187 million in Q1 2016. The Company’s earnings per share were $2.93, a decline of 2% in the reported quarter versus $2.98 in the prior year’s same quarter. Grainger’s earnings, adjusted for restructuring gains, totaled $2.88 per share and missed Wall Street’s expectations of $3.01 per share.

Segment Results

The company has two reportable business segments, the United States and Canada, which represented approximately 80%t of its sales for the quarter. The remaining operating businesses are located in Europe, Asia, and Latin America.

During Q1 2017, Grainger’s sales for the US segment totaled $1.95 billion, down 1% versus sales of $1.97 billion in Q1 2016. The decrease was attributed to a 4% decline in price and a 1% decline from lower sales of seasonal products, partially offset by a 4% increase from volume growth. Sales to customers in the Government and Heavy Manufacturing end markets led sales performance during the quarter.

For Q1 2017, operating earnings for the US segment declined 6% to $312.47 million driven by lower gross profit. The segment’s gross profit margins for the reported quarter declined 1.7% driven by the strategic price initiatives. Excluding restructuring costs and the gain on sale of assets, operating expenses were flat and operating earnings were down 12%.

During Q1 2017, Grainger’s sales for the Canada segment increased 4% to $186.14 million compared to $178.77 million in Q1 2016. The 1% increase consisted of 4% from volume, partially offset by 2% from lower price and a 1% decline from unfavorable holiday timing.

The Canadian business posted a $17 million operating loss in Q1 2017 versus a $12 million operating loss in the prior year, primarily driven by a lower gross profit margin and negative expense leverage. The gross profit margin in Canada declined 2.7% versus the prior year largely due to price deflation and higher freight costs.

During Q1 2017, Grainger’s Other Businesses sales increased 12% versus the prior year, consisting of 15% of growth from volume and price, partially offset by a 3% decline from foreign exchange, primarily attributable to weakness in the British pound. The performance was driven primarily by 23% sales growth for the single channel online businesses. Operating earnings for the Other Businesses were $32 million in the reported quarter versus $22 million in the prior year.

Cash Flow

Grainger’s operating cash flow was $181 million in Q1 2017 compared to $161 million in Q1 2016. The $161 million for the prior year reflects a reclassification from $154 million based on the adoption of ASU 2016-09, which retrospectively reclassified $7 million from operating activities to financing activities. The Company used the cash generated during the quarter along with short-term borrowings to invest in the business and return cash to shareholders through share repurchase and dividends. Grainger’s capital expenditures were $79 million in Q1 2017 versus $52 million in Q1 2016. In the reported quarter, the Company returned $231 million to shareholders through $72 million in dividends and $159 million to buy back 646,000 shares of stock.

Outlook

Grainger lowered its 2017 sales and earnings per share guidance for the year and now expects sales growth of 1% to 4% and earnings per share of $10.00 to $11.30, which incorporates the effect of the pricing acceleration and a 1% reduction in sales from foreign exchange. The Company’s previous 2017 guidance was: sales growth of 2% to 6% and earnings per share in the range of $11.30 to $12.40.

Stock Performance

At the closing bell, on Thursday, April 20, 2017, W.W. Grainger’s stock rose slightly by 0.31%, ending the trading session at $195.96. A total volume of 1.58 million shares were traded at the end of the day, which was higher than the 3-month average volume of 790.25 thousand shares. The Company’s shares are trading at a PE ratio of 19.93 and have a dividend yield of 2.49%. At Thursday’s closing price, the stock’s net capitalization stands at $11.51 billion.

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