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What's in Store for Grainger (GWW) this Earnings Season?

Zacks Equity Research

W.W. Grainger, Inc. GWW is scheduled to report first-quarter 2017 results on Apr 18, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 3.81%. Further, Grainger’s earnings outpaced the Zacks Consensus Estimate in the past four quarters, with an average beat of 1.87%.

Let’s see how things are shaping up prior to this announcement.

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


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

Factors Influencing Q1

For first-quarter 2017, Grainger expects gross margins to be down 80–130 basis points from first-quarter 2016, which will be the toughest gross profit margin quarter comparison in the year.

Also, Grainger’s oil and gas, and energy exposure in Canada is very high. The company witnessed the knock-on effects for oil and gas on construction companies in Alberta. Thus, fluctuation in oil prices will hamper its results.

Earnings Whispers

Our proven model does not conclusively show that Grainger is likely to beat on earnings 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. However, that is not the case here, as you will see below.

Zacks ESP: Grainger has an Earnings ESP of -1.33%. That is because the Most Accurate estimate is $2.97, while the Zacks Consensus Estimate is pegged at $3.01. 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 #3 increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, 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.

Share Price Performance

Grainger underperformed the Zacks categorized Industrial Services sub-industry over the past one year. Grainger’s shares lost nearly 4.6% during this period, while the industry gained 0.8%.

Stocks to Consider

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

Deere & Company DE has an Earnings ESP of +5.03% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corporation AGCO has an Earnings ESP of +5.88% and a Zacks Rank #2.

Alarm.Com Holdings, Inc. ALRM has an Earnings ESP of +7.69% and a Zacks Rank #2.

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