W.W. Grainger, Inc. (GWW), a broad line supplier of maintenance, repair and operating (MRO) products, is slated to report third-quarter fiscal 2014 results on Oct 16. In the last quarter, it posted a negative surprise of 0.64%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Grainger reported a 7% year-over-year increase in its Aug 2014 sales. Along with exceeding the prior-month increase of 6%, the figure also went ahead of the 4% gain achieved in the same period last year. Grainger’s overall sales have improved, leaving behind the slow start at the beginning of the year brought on by inclement weather.
Grainger reported sales decline in Canada in each month during the first seven months of 2014. However, daily sales in Canada finally increased 1% in U.S. currency and 6% in local currency in August, mainly driven by volume growth.
Grainger is focused on expanding its product offerings, sales force, share of its private label products as well as its e-commerce business, while it persistently expands through acquisitions.
After lowering the top end of its 2014 sales guidance, Grainger now expects sales growth between 5% and 7%, down from the previous range of 5% to 9%. While the narrowed earnings per share guidance for fiscal 2014, stands in the $12.20 to $12.60 band, compared with the previous range of $12.10 $12.85.
Earnings Whispers?
Our proven model shows that Grainger is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 or 2 or 3 for this to happen. Grainger has the right combination of the two key components.
Zacks ESP: Grainger currently has an Earnings ESP of +0.92%. This is because the Most Accurate estimate stands at $3.31, while the Zacks Consensus Estimate is pegged at $3.28.
Zacks Rank: Grainger carries a Zacks Rank #3 (Hold).
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some other companies in the industrial products sector you may want to consider as our model shows that these have the right combination of elements to post an earnings surprise this quarter:
Century Aluminum Co. (CENX) has an earnings ESP of +21.57% and sports a Zacks Rank #1 (Strong Buy).
Nordson Corporation (NDSN) has an earnings ESP of +0.88% and a Zacks Rank #2 (Buy).
Caterpillar Inc. (CAT) has an earnings ESP of +2.26% and a Zacks Rank #3.
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