W.W. Grainger, Inc.GWW is scheduled to report third-quarter 2015 results before the opening bell on Oct 16, 2015. In the last four quarters, the company delivered a positive average earnings surprise of 1.46%, beating estimates in two of the quarters. Let's see how things are shaping up prior to this announcement.
Factors at Play
Last month, Grainger reported a 2% year-over-year decrease in its monthly sales for Aug 2015 mainly because of unfavorable foreign exchange. Daily sales in Canada declined 22% in U.S. currency as the Canadian dollar weakened substantially due to plunge in crude prices.
Grainger's increased investments in supply chain and SAP implementation costs will continue to weigh on Canada segment's results going forward. Moreover, lower oil prices will persistently affect the segment's results given that about 20% of the Canada business is directly tied to the oil and gas markets.
However, Grainger is focused on expanding its product offerings and sales force as well as undertaking more acquisitions. Grainger's recent acquisition of Cromwell Group will help in accelerating growth of its single channel online business in the U.K. and Germany.
Moreover, the company is poised to benefit from its new strategy in key international markets. Grainger's single channel model, which includes MonotaRo and Zoro businesses, continue to deliver strong growth. In Europe, it has restructured Fabory and launched a single channel Zoro model, replicating its earlier success.
Our proven model does not conclusively show that Grainger is likely to beat earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. That is not the case here as we will see below.
Zacks ESP: Grainger's Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are $3.06.
Zacks Rank: Grainger's Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
Stocks to Consider
Here are some stocks you may want to consider, as our model shows these have the right combination of elements to post an earnings beat:
HD Supply Holdings, Inc. HDS with an Earnings ESP of +1.52% and a Zacks Rank #3.
Allegion plc Ordinary Shares ALLE has earnings ESP of +2.60% and carries a Zacks Rank #3.
Ball Corporation BLL has an earnings ESP of +2.11% and holds a Zacks Rank #3.
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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.