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W.W. Grainger, Inc.’s (GWW - Free Report) second-quarter 2018 adjusted earnings per share of $4.37 improved 9% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.78 by a significant margin of 16%. Grainger’s stellar second-quarter performance was driven by higher sales, operating expense leverage, lower tax rate and share count.
Including one-time items, such as restructuring charges and other charges, earnings came in at $4.16 per share in the reported quarter, soaring 149% from $1.67 recorded in the year-ago quarter.
Grainger reported revenues of $2,860 million, up 9% from the prior-year quarter figure of $2,615 million. This was driven by an increase of 9 percentage point (pp) from volume growth, 1 pp from volume and 1 pp from foreign exchange, partially offset by a decline of 1 pp from the divestiture of a specialty business. The revenue figure also beat the Zacks Consensus Estimate of $2,820 million.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
Adjusted cost of sales increased 11% year over year to $1,748 million. Adjusted gross profit climbed 7% to $1,112 million from $1,042 million recorded in the year-ago quarter. Gross margin contracted 100 basis points (bps) to 38.9%.
Grainger’s adjusted operating income in the reported quarter increased 23% to $359 million from $291 million recorded in the prior-year quarter aided by higher sales and strong operating expense leverage. Adjusted operating margin expanded 150 bps to 12.6% in the quarter from 11.1% in the year-earlier quarter.
Financial Position
Grainger had cash and cash equivalents of $312 million at the end of second-quarter 2018 compared with $327 million at the end of 2017. Cash provided by operating activities increased to $394 million in the first half of fiscal 2018 compared with $372 million in the prior-year comparable period.
Long-term debt was $2.21 billion as of Jun 30, 2018, compared with $2.25 billion as of Dec 31, 2017. During the second quarter, the company returned $111 million in cash to shareholders through $83 million in dividends and $28 million to buy back 96,000 shares.
Guidance
Backed by the quarter’s performance, Grainger raised 2018 sales and earnings per share guidance. The company now expects sales to be up 5.5-8.5% compared with the prior guidance of 5-8%. Further, the outlook for earnings per share is now $15.05-$16.05, from the prior band of $14.30-$15.30.
Share Price Performance
Over the past year, Grainger outperformed the industry with respect to price performance. The stock has gained 75% compared with 49% growth registered by the industry.
Actuant has a long-term earnings growth rate of 15.6%. Its shares have gained 17% over the past year.
DMC Global has a long-term earnings growth rate of 20%. The company’s shares have appreciated a whopping 269% in the past year.
Chart Industries has a long-term earnings growth rate of 26.9%. The stock has surged 91% in a year’s time.
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Grainger (GWW) Q2 Earnings & Sales Beat, Hikes 2018 View
W.W. Grainger, Inc. price-consensus-eps-surprise-chart | W.W. Grainger, Inc. Quote
Operational Update
Adjusted cost of sales increased 11% year over year to $1,748 million. Adjusted gross profit climbed 7% to $1,112 million from $1,042 million recorded in the year-ago quarter. Gross margin contracted 100 basis points (bps) to 38.9%.