W.W. Grainger lifts forecast after upbeat Q2 results

W.W. Grainger (GWW) reported a 142% jump in earnings for the second quarter driven by higher sales, strong operating expense leverage, a lower tax rate and a lower share count. Revenue and profit exceeded Street’s expectations. The seller of maintenance and other supplies also raised its sales and EPS guidance for the year based on its performance and momentum.

With sales rising by 9.4% to $2.86 billion, earnings climbed 142% to $237 million or $4.16 per share. Adjusted EPS soared 59% to $4.37. The company maintained its trend of surpassing earnings in the trailing four quarters, recording an average positive earnings surprise of 18.7%.

Sales benefited by a 9 percentage point rise from volume and 1 percentage point of growth from foreign exchange. This is partially offset by a 1 percentage point decline from the divestiture of a specialty business.

Looking ahead into fiscal 2018, the company raised its sales growth outlook to the range of 5.5-8.5% from 5-8%, and its EPS guidance to the range of $15.05-$16.05 from $14.30-$15.30.

Sales for the US segment increased by 9%, driven by volume growth, higher sales of seasonal products and a benefit from holiday timing. Sales from Other Businesses grew 18%, on growth from volume and price as well as a favorability of foreign exchange. The performance in Other Businesses was driven by 25% sales growth for the single channel online businesses, which continue to be a profitable growth driver.

Sales for Canada decreased by 6%, due to a dip in volume. The segment continues to face increasing expenses and the company is in the midst of considerable transformation. The results were driven by its continued focus on improving the business cost structure through branch reductions, improving service to customers and the creation of North American centers of excellence.

Shares of W.W. Grainger closed Tuesday’s regular trading session up 0.67% at $304.96 and was up about 4% in today’s pre-market trading session. The stock had been trading between $155 and $322.34 for the past 52 weeks.

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