W.W. Grainger Inc. (GWW) reported July sales growth of 10% on a year-over-year basis. Grainger continues to post double digit growth in sales. Acquisitions made by Grainger contributed one percentage point to the growth with favorable foreign exchange adding another two percentage points.
Excluding the impacts of acquisitions and foreign currency exchange rates, daily sales increased 7% during the month. Organic sales growth constituted 8% contribution from volume and 2% from price partially offset by a 3% decline from oil spill related sales in the Gulf of Mexico in 2010. In 2010, Grainger provided safety and related products to clean up the oil spill, which contributed approximately 1% to total company sales in the year.
Geographically, daily sales in the United States rose 5%, while Canada saw a jump of 30% (18% increase in local currency). Daily sales for the company's Other Businesses segment, which includes operations in Japan, Mexico, India, Puerto Rico, China and Panama, rose sharply by 59%.
The month of July had 20 selling days, a day less compared with the prior year period. However, the third quarter will have the same number of selling days (64) as the corresponding period in 2010.
Grainger posted adjusted earnings of $2.22 per share, comfortably exceeding the Zacks Consensus Estimate of $2.11 per share and $1.65 earned in the prior-year quarter. In its earnings conference call, the company raised its sales growth in the range of 9% to 10% compared with the prior guidance range of 7% to 10%. The company also guided 2011 earnings between $8.40 and $8.70 per share, up from prior the guidance of $8.10 to $8.60.
The Zacks Consensus Estimate for third-quarter 2011 is $2.33 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $8.78 per share and $9.91 per share.
We maintain our Neutral recommendation on Grainger. The quantitative Zacks #2 Rank (short term Buy rating) on the stock indicates upward pressure on the shares over the near term.
Illinois-based Grainger is a leading North American distributor of material handling equipment including safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, etc. The company’s services comprise inventory management and energy efficiency solutions. The company competes with Applied Industrial Technologies Inc. (AIT) and WESCO International Inc. (WCC).
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