Grainger (GWW) Q3 Earnings Beat Estimates, Revenues Rise Y/Y
W.W. Grainger, Inc. GWW has reported earnings per share (EPS) of $9.43 in third-quarter 2022, beating the Zacks Consensus Estimate of $8.85. The bottom line improved 14.1% year over year, aided by margin improvement in the High-Touch Solutions N.A. and Endless Assortment segments, and a strong operating performance.
Grainger’s quarterly revenues rose 6.7% year over year to $4,208 million. The top line, however, missed the Zacks Consensus Estimate of $4,230 million. Daily sales increased 8.4% from the prior-year quarter. We predicted daily sales to increase 8.1% in the quarter.
The High-Touch Solutions N.A. segment’s daily sales were up 8.7% in the quarter from the third quarter of 2022, driven by solid volume growth. Our model predicted year-over-year organic daily sales growth of 6.4% for the quarter.
The Endless Assortment segment’s daily sales were up 6% in the quarter due to increased customer acquisition across the segment and enterprise customer growth at MonotaRO. Our model predicted year-over-year organic daily sales growth of 6.9% for the quarter.
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
The cost of sales climbed 5.4% year over year to $2,553 million. The gross profit rose 9% year over year to $1,655 million. The gross margin expanded to 39.3% in the quarter compared with the prior-year period’s 38.5%, aided by improved margin performances in both segments.
Selling, general and administrative expenses rose 7.9% year over year to $988 million. Grainger’s operating income in the quarter was up 10.6% year over year to $667 million. The operating margin was 15.9%, a 55-basis-point expansion from the prior-year quarter.
Financial Position
The company had cash and cash equivalents of $601 million at the end of the third quarter of 2023, up from $325 million at the 2022-end. Cash flow from operating activities was $523 million in the third quarter of 2023 compared with $380 million in the last year's quarter.
The long-term debt was $2,260 million as of Sep 30, 2023, compared with $2,284 million as of Dec 31, 2022. Grainger returned $287 million to shareholders through dividends and share buybacks in the reported quarter.
2023 Outlook
Grainger expects net sales between $16.4 billion and $16.6 billion for the current year. The company had earlier expected $16.4-$16.8 billion. It has updated its earnings per share guidance to $36.00-$36.60 from the previously communicated $35.00-$36.75.
Price Performance
In the past year, Grainger’s shares have gained 27.3% compared with the industry’s growth of 8.6%.
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Zacks Rank and Stocks to Consider
Grainger currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Applied Industrial Technologies AIT, Emerson Electric Co. EMR and Brady BRC. All these companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pegged at $9.13 per share, which indicates year-over-year growth of 2%. Estimates have moved up 2% in the past 60 days. The company’s shares gained 27% in the last year.
Emerson has an average trailing four-quarter earnings surprise of 7.4%. The Zacks Consensus Estimate for EMR’s 2023 earnings is pegged at $4.45 per share. The consensus estimate for 2023 earnings has moved 1% north in the past 60 days. EMR’s shares gained 5.9% in the last year.
The Zacks Consensus Estimate for Brady’s 2023 earnings per share is pegged at $3.62. The consensus estimate for 2023 earnings has moved 13% north in the past 60 days and suggests year-over-year growth of 9.9%. The company has a trailing four-quarter average earnings surprise of 7.2%. Shares of BRC rallied 17.7% in the last year.
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