Grainger (GWW) To Report Q3 Earnings: What's In The Offing?

W.W. Grainger, Inc. (NYSE:GWW) is expected to report third-quarter 2019 results on Oct 23, before the opening bell. The quarterly results are likely to reflect benefits from favorable tax rates, upbeat momentum in the United States, recovery in the Canadian business, investments in digital capabilities and focus on strengthening customer relation.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $2,950 million, indicating an improvement of 4.2% from the year-ago quarter. The same for earnings is pinned at $4.44, suggesting growth of 6% from the prior-year reported figure.

In the last reported quarter, Grainger’s earnings and revenues missed the Zacks Consensus Estimate, however improved year over year. The company delivered a positive earnings surprise in all of the trailing four quarters, the average beat being 4.41%.

Shares of the company have gained 12.5% in a year, outperforming the industry’s growth of 1.5%.

Will the upcoming earnings release provide a boost to Grainger’s stock? Let’s take a look.

Earnings Whisper

Our proven model predicts an earnings beat for Grainger this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Grainger has an Earnings ESP of +0.53%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $4.46 and $4.44 per share, respectively.

Zacks Rank: The company currently carries a Zacks Rank #3.

W.W. Grainger, Inc. Price and EPS Surprise

Factors at Play

Grainger continues to strengthen relationship with customers in the United States. The company is focused on improving end-to-end consumer experience by making investments in e-commerce and digital capabilities, and implementing supply-chain improvement initiatives. Benefits from these factors will likely be reflected in the upcoming quarterly results.

The Zacks Consensus Estimate for Grainger’s quarterly sales in the United States is $2,294 million, suggesting 4.8% year-over-year growth. The Zacks Consensus Estimate for the segment’s adjusted operating income is pegged at $361 million, calling for year-over-year growth of 9.4%.

The Zacks Consensus Estimate for the Canada segment's third-quarter net sales is currently pegged at $134 million, suggesting a year-over-year drop of 10.7%. The company has been focused on reducing its cost structure in the Canada operations and managing inventory to drive profitable growth, while also focusing on making incremental investments in marketing and merchandising. This trend will likely have continued in the third quarter as well.

However, the company’s third-quarter results will likely reflect the unfavorable impact of input-cost inflation and foreign-exchange headwinds. Rising freight costs are another challenge for the company. Further, higher operating expenses, due to investments in digital marketing capabilities, are another concern. These are likely to have hindered its margin performance in the July-September quarter.

Stocks to Consider

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

John Bean Technologies Corporation (NYSE:JBT) has an Earnings ESP of +0.55% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northwest Pipe Company (NASDAQ:NWPX) , a Zacks #3 Ranked stock, has an Earnings ESP of +19.23%.

Sealed Air Corporation (NYSE:SEE) has an Earnings ESP of +2.40% and holds a Zacks Rank of 3, at present.

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