Grainger (GWW) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
W.W. Grainger, Inc. GWW has reported earnings per share (EPS) of $9.28 in second-quarter 2023, beating the Zacks Consensus Estimate of $8.96. The bottom line improved 29.1% year over year, driven by upbeat demand in the High-Touch Solutions N.A. and Endless Assortment segments, and a strong operating performance.
Grainger’s quarterly revenues rose 9% year over year to $4,182 million. However, the top line missed the Zacks Consensus Estimate of $4,196 million. Daily sales increased 10.1% from the prior-year quarter. We predicted daily sales to increase 8.8% in the quarter.
The High-Touch Solutions N.A. segment’s daily sales were up 9.9% in the quarter from the second quarter of 2022, driven by price realization and solid volume growth. Our model predicted year-over-year organic daily sales growth of 6.2% for the quarter.
The Endless Assortment segment’s daily sales were up 10.1% in the quarter due to increased customer acquisition across the segment and enterprise customer growth at MonotaRO. However, the reported figure lagged our estimated growth of 20.8%.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
W.W. Grainger, Inc. price-consensus-eps-surprise-chart | W.W. Grainger, Inc. Quote
Operational Update
Cost of sales rose 5.9% year over year to $2,538 million. The gross profit rose 14.1% year over year to $1,644 million. The gross margin expanded to 39.3% in the quarter compared with the prior-year period’s 37.6%.
Grainger’s operating income in the quarter was up 23.5% year over year to $661 million. The operating margin was 15.8%, a 190-basis-point expansion from the prior-year quarter.
Financial Position
The company had cash and cash equivalents of $515 million at the end of the second quarter of 2023, up from $262 million at the second-quarter 2022 end. Cash flow from operating activities was $450 million in the second quarter of 2023 compared with $250 million in the last year's quarter.
Long-term debt was $2,275 million as of Jun 30, 2023, compared with $2,284 million as of Dec 31, 2022. Grainger returned $265 million to shareholders through dividends and share buybacks in the reported quarter.
2023 Outlook
Backed by the strong second-quarter performance, Grainger expects net sales for the current year between $16.4 billion and $16.8 billion. The company had earlier provided a range of $16.2 billion to $16.8 billion. The company has raised its earnings per share guidance to $35.00-$36.75 from the previously communicated $34.25-$36.75.
Price Performance
In the past year, Grainger’s shares have gained 56.3% compared with the industry’s growth of 28.4%.
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Zacks Rank and Other Key Picks
Grainger currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and Terex Corporation TEX. WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present, and TEX has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved north by 22.6% in the past 60 days. Its shares gained 52.2% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 256.3%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at $1.12 per share. The consensus estimate for 2023 earnings has moved 7.8% north in the past 60 days. MTW’s shares gained 57.8% in the last year.
The Zacks Consensus Estimate for Terex’s 2023 earnings per share is pegged at $1.61. Estimates were unchanged in the last 60 days. It has a trailing four-quarter average earnings surprise of 27.1%. TEX gained 81.3% in the last year.
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