W.W. Grainger Inc. (GWW) reported February 2011 sales growth of 11% year over year. It increased from a growth of 10% in January 2011.
February had 20 selling days in 2011, the same as February last year. Acquisitions made by Grainger contributed one percentage point to the growth with favorable foreign exchange adding another percentage point. Excluding the impacts of acquisitions and foreign currency exchange rates, daily sales increased 9% (7% volume and 2% price) during the month.
Geographically, daily sales in the United States rose 8% driven by strong growth of customers at end-market products.
Canada saw a jump of 24% (a 16% increase in local currency) attributable to strong growth in the heavy manufacturing, forestry, agriculture and mining, and oil and gas sectors.
Daily sales for the company’s Other Businesses segment, which includes operations in Japan, Mexico, India, Puerto Rico, China and Panama, rose sharply by 46%. The solid improvement was largely driven by strong sales growth in China and Japan as well as incremental sales from the acquired business in Colombia and strong growth in Mexico.
Grainger reported fourth quarter 2010 adjusted earnings per share of $1.79, ahead of $1.27 in the year-ago period as well as the Zacks Consensus estimate of $1.68.
The company, during its earnings conference call, reaffirmed its fiscal 2011 earnings to range between $7.15 and $7.90 per share, driven by sales growth of 5% to 9%. The company expects price realization of 1% to 2% in 2011. The first quarter will have 64 selling days versus 63 selling days in 2010.
The Zacks Consensus Estimate for first-quarter 2011 is $1.76 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $7.81 per share and $8.78 per share.
Grainger remains focused on expanding its product offering and has the financial wherewithal to further invest in growth opportunities, increase dividends and reinvest capital through share repurchases. Gradually improving economic activity, market share gains, benefits from growth investments, share repurchases and acquisition accretion should lead to strong earnings growth going forward.
We maintain our long-term Neutral recommendation on Grainger. The quantitative Zacks #3 Rank (short term Neutral rating) for the company indicates no clear directional pressure on the stock over the near term.
Based in Lake Forest, Illinois, Grainger is a distributor of facilities maintenance and other related products and services. The company distributes 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.
Grainger competes with Applied Industrial Technologies Inc. (AIT) and WESCO International Inc. (WCC).
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