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Grainger (GWW) Q4 Earnings Lag, Revenues Beat Estimates

W.W. Grainger, Inc. GWW reported fourth-quarter 2020 adjusted earnings per share (EPS) of $3.66, missing the Zacks Consensus Estimate of $3.79. The bottom line also decreased 6% year over year primarily on lower operating earnings.

Including one-time items, earnings came in at $3.12 in the reported quarter. The figure surged 66% from the year-ago quarter.

Grainger’s quarterly revenues went up 3% year over year to $2.94 billion. The top line also surpassed the Zacks Consensus Estimate of $2.91 billion.

Daily sales for the quarter increased 5.6% compared with the prior-year quarter. This increase in sales primarily resulted from share gains in the U.S. segment and significant growth in the endless assortment businesses, offsetting declines in the Canada segment.

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

Adjusted cost of sales increased 7.8% year over year to $1,914 million. Gross profit was down 5.4% year over year to $1,027 million. Gross margin contracted to 35% in the quarter from the prior-year quarter’s 38% due to the pandemic-induced headwinds.

Grainger’s adjusted operating income in the fourth quarter declined 3.8% year on year to $295 million. Adjusted operating margin came in at 10% compared with the prior-year quarter’s 10.7%.

Financial Position

The company had cash and cash equivalents of $585 million at the end of 2020, substantially up from the $360 million witnessed at the end of 2019. Cash provided by operating activities increased to $1,123 million in 2020 from $1,042 million in 2019.

Long-term debt was $2,389 million as of Dec 31, 2020, compared with $1,914 million as of Dec 31, 2019. In 2020, the company returned $939 million to shareholders through dividends and share buybacks.

2020 Results

Grainger reported adjusted earnings per share of $16.18 in 2020, down 6% from the prior-year reported figure of $16.70. However, earnings missed the Zacks Consensus Estimate of $16.32. Including one-time items, the bottom line came in at $12.82, down 16% year over year.

Sales climbed 3% year over year to around $11.8 billion. The top line came in line with the Zacks Consensus Estimate.

Price Performance

Over the past six months, Grainger’s shares have gained 10.2% compared with the industry’s rally of 57.9%.



Zacks Rank and Stocks to Consider

Grainger currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industrial products sector are AGCO Corp. AGCO, AptarGroup Inc. ATR and Crown Holdings, Inc. CCK. While AGCO flaunts a Zacks Rank #1 (Strong Buy), AptarGroup and Crown Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has an expected earnings growth rate of 15.8% for the current fiscal year. The company’s shares have gained around 60% in the past year.

AptarGroup has an expected earnings growth rate of 14.4% for the current fiscal. The company’s shares have appreciated around 17% in the past year.

Crown Holdings has an estimated earnings growth rate of 11.7% for the current fiscal year. The company’s shares have rallied nearly 21% over the past year.

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