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W.W. Grainger Q4 profit jumps 38%, beats estimates

W.W. Grainger (GWW) reported a 38% jump in earnings for the fourth quarter helped by higher sales, operating expense leverage and a lower tax rate. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates.

Net income climbed 38% to $209 million and earnings soared 40% to $3.68 per share. Adjusted earnings grew 35% to $3.96 per share.

Net sales increased 5% to $2.76 billion. The latest quarter contained one more selling day than the prior year. The company’s US operations were open for business both Christmas Eve and New Year’s Eve but the revenue on those days was significantly lower than normal. That lower revenue effectively offset the benefit of the additional calendar sales day.

Looking ahead into the full year 2019, the company expects net sales growth in the range of 4% to 8.5% and earnings in the range of $17.10 to $18.70 per share. Gross margin is predicted to be 38.1% to 38.7% and operating margin is projected to be 12.2% to 13%. Capital expenditures are anticipated to be $300 million to $350 million.

Grainger fourth quarter 2018 earnings snapshot

For fiscal 2019, the company sees share buyback in the range of $450 million to $600 million and dividend in the range of $310 million to $325 million. The tax rate is anticipated to be in the range of 24.5% to 27.5%. Grainger remained confident in its ability to drive volume growth above the market and generate operating expense leverage in 2019 and beyond.

For the fourth quarter, sales for the US segment increased by 6%, driven by volume growth, price inflation, and December holiday timing. Sales from Other Businesses grew 11%, on growth from the volume. The performance in Other Businesses was driven by 21% sales growth for the single channel online businesses.

Sales for Canada decreased by 24%, due to a dip in volume. Gross margin rose 160 basis points normalized for the revenue recognition accounting change. Operating expense fell 27% normalized for the revenue recognition accounting change.

Shares of W.W. Grainger closed Wednesday’s regular trading session down 1.15% at $297.16 and was up about 0.96% in today’s pre-market trading session. The stock had risen over 29% in the past year and over 8% in the past three months.


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