W.W. Grainger, Inc. 's GWW fourth-quarter 2016 adjusted earnings per share of $2.45 declined 2% from the prior-year figure of $2.49. However, earnings beat the Zacks Consensus Estimate of $2.36.
Including one-time items, earnings were $1.01 per share in the reported quarter, down significantly from $2.30 in the year-ago quarter.
Grainger reported revenues of $2,471 million, down 0.3% from the prior-year quarter figure of $2,478 million. However, it marginally beat the Zacks Consensus Estimate of $2,446 million. There were 63 selling days in the reported quarter, one fewer than in the 2015 quarter.
W.W. Grainger, Inc. Price, Consensus and EPS Surprise
On a daily basis, total company sales were up 1% for the quarter. The sales increase for the quarter included a 1 percentage point (pp) increase from volume and a 1 pp increase from the timing of the holidays in December, offset by a 1 pp reduction in price.
Cost of sales inched up 0.3% year over year to $1,481 million. Gross profit decreased 1.3% to $989.7 million from $1,002 million in the year-ago quarter. Gross margin contracted 30 basis points to 40.1% due to unfavorable customer mix and price deflation exceeding product cost deflation.
Grainger's adjusted operating income in the quarter went down 2.5% to $274.8 million from $281.9 million in the prior-year quarter. Operating margin fell to 11.1% in the quarter from 11.4% in the prior-year quarter.
Revenues for the U.S. segment dipped 1.3% year over year to $1,897 million. Adjusted operating income for the segment decreased 2.7% year over year to $300.3 million.
Revenues of $181.4 million from the Canadian Acklands-Grainger business were down 11% in U.S. dollars and local currency from the year-ago quarter. The segment reported an adjusted operating loss of $10.7 million, against an operating income of $7.9 million in the prior-year quarter.
Revenues from Other businesses (which include Asia, Europe and Latin America) increased 11% year over year to $483.5 million. The segment's adjusted operating profit soared 63% to $16.7 million, from $10.2 million in the prior-year quarter.
At the end of 2016, Grainger generated cash and cash equivalents of $274 million, which declined from $290 million at the end of 2015. Cash flow from operations came in at $1,003 million for the fiscal 2016 compared with $989.9 million in the prior fiscal.
At the end of 2016, Grainger's long-term debt increased to $1,841 million, compared with $1,388 million at the end of 2015. During the year, the company returned $1.1 billion in cash to its shareholders in the form of share repurchases and dividends.
Grainger reported adjusted earnings per share of $11.58 in 2016, down 3% from $11.94 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $11.50 per share. Including one-time items, the bottom line came in at $9.87, down 15% from $11.58 recorded in 2015.
Revenues grew 2% year over year to $10.1 billion from $10 billion in 2015. Revenues came in line with the Zacks Consensus Estimate.
Grainger reaffirmed its sales growth guidance of 2-6% for full-year 2017 and earnings per share of $11.30-$12.40.
Grainger will progress on key initiatives, including sales force effectiveness and vertical alignment of the sales force in the U.S., the medium-sized customer acquisition and growth of the online model globally. The company remains focused on creating value for customers, delivering a seamless customer experience and reducing costs in 2017.
Share Price Performance
In the last one year, Grainger has outperformed the Zacks classified Industrial Services sub-industry with respect to price performance. The stock gained 33.9%, while the industry rose 33.3% over the same time frame.
Grainger currently carries a Zacks Rank #3 (Hold).
ABB Ltd delivered an average positive earnings surprise of 23.50% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Altra Industrial Motion also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 8.06% in the past four quarters. Apogee, another Zacks Rank #1 stock, has an average positive earnings surprise of 13.24% for the past four quarters.
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