Grainger To Report Q4 Earnings: What's In Store?

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

Factors Likely at Play

While volumes will improve driven by price initiatives and improved demand environment, the bottom line is likely to face the brunt of elevated expenses. Expenses in the fourth quarter will be higher due to normal seasonality and also due to the incremental investments in the single channel online business and digital marketing.

The Zacks Consensus Estimate for total sales of $2.6 billion indicates 2% growth from the prior-year quarter. However, growth in the top line will not translate to growth in earnings due to higher expenses as evident from drop of 11% in earnings projected by the Zacks Consensus model. The Zacks Consensus Estimate for earnings for the fourth quarter is currently pegged at $2.18 compared with $2.45 reported in fourth-quarter 2016.

Even though the company remains focused on improving gross margins and reducing cost structure in Canada, the segment continues to be challenged due to higher expenses. Further, given that oil and gas and energy exposure in Canada is very high, the segment remains affected by fluctuation oil and gas prices. Per the Zacks Consensus Estimates, net sales in the Canada segment will rise 6% to around $191 million in the fourth quarter. However, due to the abovementioned reasons, the segment will likely report an adjusted operating loss of $11.4 million, wider than the operating loss of $10.7 million in fourth-quarter 2016.

Per the Zacks Consensus Estimate, net sales in the Unites States will increase 2% year over year to $1,935 million. The segment will report 12% drop in adjusted operating income to $263 million due to higher expenses.