Grainger Q1 Profit Tops View, Sales In Line; Backs FY14 Forecast

(RTTNews) - Specialty supplier W.W. Grainger, Inc. (GWW) reported Wednesday a higher profit for its first quarter, boosted mainly by sales growth in its United States segment, despite weak performance in Canada. Earnings per share topped analysts' estimates, while top line met view. Further, the company reiterated its fiscal 2014 forecast.

The distributor of maintenance, repair and operating or MRO supplies also reported that sales for March increased 8 percent, including 1 percentage point benefit from holiday timing.

Chairman, President and Chief Executive Officer Jim Ryan said, "We are encouraged by the strong finish in March and our solid operating performance in a quarter that was marked by several disruptions from severe winter weather in January and February. We are particularly encouraged by the performance of our U.S. business, which was driven by continued market share gains with large customers."

For the first quarter, net earnings attributable to the company increased 2 percent to $216.65 million from $212 million a year ago.

Earnings per share of $3.07 increased 4 percent from $2.94 in 2013. On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $2.96 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the period grew 5 percent to $2.39 billion from $2.28 billion a year earlier. Analysts also were looking for sales of $2.39 billion for the quarter.

Sales were driven by volume growth of 4 percentage points, 1 percentage point rise from price and 1 percentage point from higher sales of seasonal products, the company noted. These were partially offset by a 1 percentage point decline from business disruptions due to the extreme weather.

The company's sales for the United States segment increased 7 percent, with strong sales growth in the Heavy and Light Manufacturing, Natural Resources, Retail and Commercial customer end markets.

In Canada, sales for Acklands-Grainger decreased 10 percent in U.S. dollars and were down 2 percent in local currency, mainly due to lower volume. The company noted that the business in Canada continues to be negatively affected by a weak macroeconomic environment, unfavorable currency exchange, lower commodity prices and a reduction of Canadian exports.

Ryan said, "We are facing near-term economic and foreign exchange headwinds in Canada and are unhappy with the current performance. However, we will continue to invest in the Canadian infrastructure as we are very optimistic about the business over the long term."

Sales for the Other Businesses, which includes operations primarily in Asia, Europe and Latin America, increased 11 percent.

Gross profit margin decreased 0.1 percentage point year-over-year to 45.1 percent, driven by lower gross margins from the newly acquired businesses. Operating earnings increased 3 percent to $354.34 million from last year's $343.31 million.

Looking ahead, the company continues to expect full year 2014 earnings per share of $12.10 to $12.85 and sales growth of 5 to 9 percent. Analysts expect earnings of $12.63 per share on sales growth of 6.8 percent.

On Tuesday, Grainger shares gained 0.74 percent, and closed at $250.77.