Last week, you might have seen that W.W. Grainger, Inc. (NYSE:GWW) released its annual result to the market. The early response was not positive, with shares down 8.0% to US$303 in the past week. It was not a great result overall. While revenues of US$11b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 12% to hit US$15.32 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on W.W. Grainger after the latest results.
Following the latest results, W.W. Grainger's 17 analysts are now forecasting revenues of US$12.0b in 2020. This would be an okay 4.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to expand 19% to US$18.50. Before this earnings report, analysts had been forecasting revenues of US$12.0b and earnings per share (EPS) of US$18.81 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Analysts reconfirmed their price target of US$332, showing that the business is executing well and in line with expectations. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic W.W. Grainger analyst has a price target of US$398 per share, while the most pessimistic values it at US$278. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
In addition, we can look to W.W. Grainger's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting W.W. Grainger's growth to accelerate, with the forecast 4.4% growth ranking favourably alongside historical growth of 3.2% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 4.6% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that W.W. Grainger is expected to grow at about the same rate as the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target held steady at US$332, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple W.W. Grainger analysts - going out to 2024, and you can see them free on our platform here.
You can also see whether W.W. Grainger is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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