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Grainger (GWW) to Report Q2 Earnings: What's in the Cards?

W.W. Grainger, Inc. GWW is scheduled to report second-quarter 2020 results on Jul 23, before the opening bell.

Q2 Estimates

The Zacks Consensus Estimate for the second-quarter revenues is pegged at $2.73 billion, indicating a decline of 5.7% from the year-ago quarter. The same for earnings per share stands at $3.31, suggesting a decline of 28.7% from the prior-year reported figure. The estimate for earnings has gone down 2% over the past 30 days.

A Sneak Peak at Q1 Results

In the last reported quarter, Grainger’s earnings declined on a year-over-year basis despite rise in revenues. While earnings lagged the Zacks Consensus Estimate, revenues beat the same. Notably, the company has missed the Zacks Consensus Estimate in each of the trailing four quarters. It has a trailing four-quarter negative earnings surprise of 3.02%, on average.

W.W. Grainger, Inc. Price and EPS Surprise

W.W. Grainger, Inc. Price and EPS Surprise

W.W. Grainger, Inc. price-eps-surprise | W.W. Grainger, Inc. Quote

Factors to Note

Grainger has been experiencing a surge in sales of personal protective equipment (PPE) and safety products courtesy of higher customer demand in response to the coronavirus pandemic. The incremental demand came primarily from customers in the front-lines of the pandemic, including hospitals, healthcare providers, governments, first responders and critical manufactures. The company has been witnessing increased levels of safety and cleaning product sales to large healthcare, government and critical manufacturing customers, which might have contributed the second-quarter performance.

Grainger has been focused on improving end-to-end consumer experience by making investments in e-commerce and digital capabilities, and implementing supply-chain improvement initiatives. With customers forced to stay at home due to the restrictions imposed by governments globally to stem the coronavirus spread, e-commerce sales are likely to have driven the to-be-reported quarter’s performance.

However, the company caters to customers in the manufacturing and transportation industries, which have been impacted by the coronavirus outbreak. This may weigh on Grainger’s second-quarter results. Further, the Canada business has a heavy exposure to natural resource customer base. Notably, these customers contributed 32% to the segment’s revenues in 2019 and 29% in first-quarter 2020. The low oil prices might have dented the segment’s second quarter performance.

The COVID-19 pandemic las led to a shift in demand toward lower-margin products. In addition, higher operating costs in response to the COVID-19 pandemic and related activities are likely to have dented operating margin in the second quarter. These factors are likely to get reflected in the second-quarter results.

Price Performance

Shares of the company have gained 23.9% in a year compared with the industry’s growth of 5%.

Earnings Whispers

Our proven model predicts an earnings beat for Grainger this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Grainger is +7.11%.

Zacks Rank: Grainger currently carries a Zacks Rank of 3.

Other Stocks Poised to Beat Earnings Estimates

Here are some other Industrial Products stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Cintas Corporation CTAS currently has a Zacks Rank #2 and an Earnings ESP of +14.43%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation DOV has an Earnings ESP of +4.40% and a Zacks Rank of 2.

Rockwell Automation, Inc. ROK has an Earnings ESP of +7.26% and a Zacks Rank of 2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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