Grainger (GWW) Q4 Earnings, Revenues Beat On Higher Volumes

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

Segment Performance

Revenues for the U.S. segment rose 5% year over year to $1,991 million, resulting from 11 pp increase from volume partially offset by declines of 5 pp from price and 1 pp from the divestiture of a specialty business. Adjusted operating income for the segment decreased 1% year over year to $299 million.

Revenues of $189 million from the Canada segment increased 4.5% in U.S. dollars. The increase consisted of 5 pp from favorable foreign exchange and 4 pp increase from price, partially negated by 4 pp decrease from volume. The segment reported an adjusted operating loss of $4.3 million compared with a loss of $10.7 million incurred in the prior-year quarter.

Revenues from Other businesses (which include Asia, Europe and Latin America) climbed 16% year over year to $559 million primarily driven by MonotaRO in Japan and Zoro in the United States. The segment’s adjusted operating profit improved 51% to $25 million from $17 million recorded in the comparable period last year.

Financial Position

Grainger had cash and cash equivalents of $327 million at the end of 2017 compared with $274 million at the end of 2016. Cash provided by operating activities increased to $1.1 billion in fiscal 2017, compared with $1.0 billion in the prior year.

As of 2017-end, the company’s long-term debt increased to $2.25 billion compared with $1.84 billion at the end of 2016. During 2017, the company returned $910 million in cash to shareholders through $304 million in dividends and $605 million to buy back 3 million shares.

Fiscal 2017 Performance

Grainger’s adjusted earnings per share edged down 1% year over year to $11.46 in fiscal 2017. Earnings outpaced the Zacks Consensus Estimate of $10.71. Revenues came in at $10.4 billion that beat the Zacks Consensus Estimate of $10.36 and also improved 3% on a year-over-year basis.

Guidance

To reflect lower corporate taxes due to U.S. tax legislation and better-than-expected 2017 results, Grainger raised earnings per share guidance for 2018. The company maintains sales growth guidance in the range of 3-7%.

Earnings per share for 2018 is now projected at $12.95-$14.15, up from the previous range of $10.60-$11.80. The increase in the guidance factors in a 50 cents contribution from better-than-expected 2017 operating performance, a $2.15 benefit from a lower corporate tax rate under U.S. tax legislation and 6 cents from incremental share buybacks funded by the benefits of the tax legislation. However, these gains will be partially offset by 10 cents of lower benefits from clean energy investments and 26 cents in increased investment in the business funded by the gains of the tax legislation.

Share Price Performance