CHICAGO, April 19, 2011 /PRNewswire/ -- Zacks.com
announces the list of stocks featured in the Analyst Blog. Every
day the Zacks Equity Research analysts discuss the latest news and
events impacting stocks and the financial markets. Stocks recently
featured in the blog include: W.W. Grainger Inc. (NYSE:
GWW), Fastenal Co. (Nadsdaq: FAST), Applied Industrial
Technologies Inc. (NYSE: AIT), WESCO International Inc.
(NYSE: WCC) and Wynn Resorts, Limited (Nasdaq: WYNN).
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Here are highlights from Monday's Analyst Blog:
Grainger: Record 1Q, Guides Higher
W.W. Grainger Inc. (NYSE: GWW) delivered record earnings
per share (EPS) of $2.18 in its
fiscal 2011 first quarter ended March 31,
2011, up 58% from an adjusted EPS of $1.38 in the year-ago period. Earnings were way
ahead of the Zacks Consensus Estimate of $1.79.
The impressive results were driven by expanding product lines,
providing new services complementing Grainger's products,
investments in eCommerce and enhancement of sales force. These
efforts have helped gain market share in North America as well as penetration in the
high growth, emerging markets.
The prior-year quarter's EPS excluded a 15 cent per share expense related to the tax
treatment of retiree healthcare benefits following the passage of
the Patient Protection and Affordable Care Act, and an 8 cent per share benefit from changes to the
company's paid time off policy. Including these items, EPS in the
first quarter of fiscal 2010 was $1.31. When considering this as the base
comparison, EPS climbed a massive 66%.
Revenues in the quarter were $1,883.6
million, a 12.6% jump from $1,672.3
million in the year-ago period and above the Zacks Consensus
of $1,837 million. On a daily basis,
sales increased 11% in the quarter with January, February and March
posting increases of 10%, 11% and 12%, respectively.
Volumes contributed 7 percentage points and pricing added
another 2 percentage point benefit. Foreign exchange and
acquisitions added one percentage point each to the growth in the
quarter.
As a percentage of revenue, the cost of merchandise improved 180
basis points to 56% and warehousing, marketing and administrative
expenses as a percentage of revenue decreased 120 basis points to
30.1%. Consequently, gross margin expanded 180 basis points to 44%
and operating margin widened 300 basis points to 13.9% in the
quarter.
Segment Performance
Revenues from the United States
segment increased 9% (a 7% increase on a daily basis) year over
year to $1,537.7 million as all the
end markets showed improvement, led by heavy manufacturing. Volumes
added 5 percentage points while pricing added 2 percentage points
to the increase. Monthly sales showed an upward trend with daily
sales increasing 6% in January and 8% in February and March
alike.
Operating income for the segment upped 27% (33% excluding the
change in the paid time off policy in the year-ago quarter) to
$256.4 million, driven by sales
growth, improved gross profit margins and operating expenses
increasing at a slower rate than sales. Segment operating margin
expanded 240 basis points to 16.7%.
Revenues from the Acklands-Grainger business in Canada leaped 25% to $242.4 million. On a daily sales basis, revenues
increased 23%. Strong growth, especially from customers in the
agriculture and mining, oil and gas, heavy manufacturing, forestry,
transportation and government sectors, culminated in the increase.
On a daily basis, sales were up 18% in January, 16% in February and
16% in March.
Operating income in Canada
increased an impressive 279% (260% in local currency) to
$23.9 million driven by strong sales
and a 380 basis point improvement in gross margin. The gross margin
expansion was spurred by less price discounting and better customer
mix. On top of this, product cost deflation tied to the strength of
the Canadian dollar, along with price increases and positive
operating expense leverage due to tight cost controls contributed
to the improvement.
Revenues from the other businesses (which include Japan, Mexico, India, Puerto
Rico, China and
Panama) were up 44% to
$116.9 million ascribed to
incremental sales from the Japanese, Mexican and Colombian
businesses, combined with sales growth in other international
businesses.
Operating earnings of $6.4 million
for the Other Businesses were a stark contrast to the loss of
$0.82 million in the year-ago period
given strong earnings growth in Japan and Mexico, coupled with lower operating losses in
China and India.
Financial Position
Grainger had cash and cash equivalents of $334.7 million as of March
31, 2011, up from $313.4
million as of December 31,
2010 and down from $548.5
million as of March 31,
2010.
The company generated net cash from operating activities of
$118.4 million in the reported
quarter, up from $113.2 million in
the year-ago quarter. Capital expenditures for the quarter were
$33 million versus $14 million in the year-ago period. Grainger
returned approximately $89 million to
shareholders through the repurchase of 376,000 shares of common
stock and dividend payments.
The debt-to-capitalization ratio was 17.0% as of March 31, 2011 compared with 17.9% as of
December 31, 2010 and 18.0% as of
March 31, 2010.
Outlook
Based on the upbeat first quarter results, Grainger upped its
fiscal 2011 guidance, which it had declared at its analyst meeting
in November. The company now expects sales growth in the range of
7% to 10% compared with the prior guidance range of 5% to 9%. The
company forecasts fiscal 2011 EPS to range between $8.10 and $8.60 in place of its prior expected
range of $7.15 to $7.90.
Our Take
Grainger remains focused on expanding its product offering and
growing the share of its private label products. It launched a
multi-year product line expansion program in 2006 and has since
added approximately 234,000 new products. Grainger has a long-term
vision to expand the count to 500,000 products. The continued
success of this program is expected to drive sales growth in 2011
and beyond.
Grainger's balance sheet remains strong and, given its cash
position, we believe Grainger can further invest in growth
opportunities, increase dividends and reinvest capital through
share repurchases. The company has been rewarding shareholders with
an uninterrupted streak of increased dividends for 39 consecutive
years.
A Quick Look at Peers
Fastenal Co. (Nadsdaq: FAST) reported first quarter EPS
of 54 cents, a 42.1% jump from
38 cents a year ago, beating the
Zacks Consensus Estimate of 51 cents.
Net sales for the quarter totaled $640.6
million, up 23% year over year, driven by an improvement in
sales to the company's manufacturing as well as non-residential
construction customers. Grainger's other competitors – Applied
Industrial Technologies Inc. (NYSE: AIT) and WESCO
International Inc. (NYSE: WCC) – are yet to declare their first
quarter results.
Illinois-based Grainger is a
leading North American distributor of material handling equipment,
safety and security supplies, lighting and electrical products,
power and hand tools, pumps and plumbing supplies, cleaning and
maintenance supplies, forestry and agriculture equipment, building
and home inspection supplies, vehicle and fleet components, and
various aftermarket components. The company's services comprise
inventory management and energy efficiency solutions.
Wynn Resorts Upgraded to Outperform
We are upgrading our rating on Paradise, Nevada-based Wynn Resorts, Limited
(Nasdaq: WYNN), a developer and operator of high-end hotels and
casinos in Las Vegas and
Macau, to Outperform from
Neutral.
The rating upgrade is based on strong growth momentum in
Macau, which is the world's
largest gambling market. Wynn Resorts generates 73% of its revenue
from Macau. In both February and
March, Macau casino revenue leaped
48% driven by robust demand from Chinese gamblers and new visitors
from China's mainland, thus
boosting the earnings of the company. As a result, we also expect
Wynn Resorts to report first-quarter 2011 results above the Zacks
Consensus Estimate. The company is slated to release its
first-quarter results on Tuesday, April
19.
Wynn Resort also boasts a potential Cotai project in the
pipeline, which will further expand its operations in Macau. The site preparation for the project is
already underway and the company expects to start construction in
March or April, 2011.The management plans to launch the project in
late 2014 or early 2015.
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