Grainger Poised To Benefit From Sales Initiatives - Analyst Blog
February 25 2014 - 3:00PM
Zacks
On Feb 21, 2014, we issued an
updated research report on W.W. Grainger Inc.
(GWW). This leading broad line supplier of maintenance, repair and
operating (MRO) products reported fourth-quarter earnings per share
of $2.59, up 7% year over year, on Jan 24. Earnings were within the
company’s guided range of $2.53 to $2.73 but were short of the
Zacks Consensus Estimate of $2.63.
Citing a weaker Canadian dollar in recent months and the
divestiture of a number of direct marketing Specialty Brands,
Grainger narrowed its earnings-per-share guidance to the range of
$12.10–$12.85 for fiscal 2014, from the prior guidance of
$12.25–$13.00 per share. Grainger lowered its sales growth guidance
to a new range of 5% to 9%, against the prior guidance of 6% to
10%.
International operations are dragging down the company’s
performance. Management is currently evaluating the operating
performance and strategic direction of some of the international
businesses that are not meeting expectations.
Nevertheless, Grainger remains focused on expanding its product
offerings, sales force as well as the share of its private label
products which will lead to long-term growth. In the United States,
Grainger added 180 new sales representatives and over 300,000 new
products in 2013, bringing the total number of online products to
more than 1.2 million. In Canada, Grainger announced the addition
of 200,000 products to its online offering.
Moreover, Grainger expects incremental investment spending to total
approximately $130 million in 2014, marking the fourth consecutive
year of growth spending on initiatives such as new sales
representatives and investments in IT infrastructure, new branches
and distribution centers and e-commerce.
Grainger continues to invest in e-commerce and expects to increase
the number of customers utilizing this channel and its percentage
of overall sales. Grainger crossed the $3 billion mark in
e-commerce sales in 2013, representing 33% of total company sales.
Grainger’s target is to increase it to 50% by 2015. E-commerce is
one of Grainger’s most efficient channels as it is reportedly
growing twice as fast as other channels and is deemed to be
Grainger’s most profitable channel.
The trimmed guidance led to negative estimate revisions for fiscal
2014 for Grainger. All the 14 estimates for 2014 have been revised
downward over the past 30 days. This led to a 3% drop in the Zacks
Consensus Estimate for fiscal 2014, which now stands at $12.62 per
share.
Grainger currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some stocks that are worth considering within this sector include
Graco Inc. (GGG), Altra Industrial Motion
Corp. (AIMC) and ScanSource, Inc. (SCSC),
all of which hold a Zacks Rank #2 (Buy).
ALTRA HOLDINGS (AIMC): Free Stock Analysis Report
GRACO INC (GGG): Free Stock Analysis Report
GRAINGER W W (GWW): Free Stock Analysis Report
SCANSOURCE INC (SCSC): Free Stock Analysis Report
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