Grainger Q4 Profit Declines, Misses View; Lowers 2015 Outlook

(RTTNews) - Maintenance supplies distributor W.W. Grainger, Inc. (GWW) on Monday reported a 5 percent decline in profit for the fourth quarter from last year, as higher sales were more than offset by one-time charges.

Adjusted earnings per share for the quarter missed analysts' estimates. Looking ahead, the company lowered its financial outlook for fiscal 2015, citing further weakening of the Canadian and Japanese currencies as well as the deteriorating macroeconomic environment in Canada.

Jim Ryan, Chairman, President and Chief Executive Officer of Grainger said, "This was a challenging year, and we were not satisfied with our overall 2014 performance. As we committed to a year ago, we addressed several smaller underperforming businesses and believe we have positioned the company for better results going forward."

Net earnings attributable to the company for the fourth quarter was $148.84 million or $2.14 per share, down from $156.75 million or $2.20 per share in the prior-year period.

Unfavorable foreign exchange represented a $0.02 reduction to earnings per share.

In the latest quarter, the company recorded charges totaling $0.66 per share. This includes $0.40 per share related to the previously-announced shutdown of the business in Brazil, $0.11 per share in goodwill impairment charges related to the business in Colombia, and $0.15 per share in restructuring charges in Europe.

Adjusted earnings for the latest quarter were $2.80 per share, compared to $2.59 per share in the year-ago period. On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $2.83 per share for the quarter. Analysts' estimates typically exclude special items.

However, net sales for the quarter grew 5 percent to $2.51 billion from $2.38 billion in the same period last year. Analysts had a consensus revenue estimate of $2.50 billion for the quarter.

The sales increase in the latest quarter consisted of 7 percentage points from volume, 1 percentage point from price and 1 percentage point from sales of Ebola related safety products.

These were partly offset by a 2 percentage points decline from unfavorable foreign exchange and a 1 percentage point negative variance from lapping an extra month of sales from the E&R Industrial, Inc. acquisition.

The company's sales for the U.S. segment increased 6 percent from last year to $1.99 billion, reflecting strong sales growth to customers in the natural resources, commercial and manufacturing customer end markets contributed to the sales increase in the quarter.

In Canada, sales rose 3 percent in U.S. dollars to $279.14 million, and also increased 11 percent in local currency, mainly due to the acquisition of WFS Enterprises and on higher volume.

Sales for the other businesses, which includes operations primarily in Asia, Europe and Latin America, increased 13 percent to $307.59 million.

For fiscal 2014, Grainger's net income rose to $801.73 million or $11.45 per share from $797.04 million or $11.13 per share in the previous year. Adjusted earnings per share for the year were $12.26, compared to $11.52 last year.

Net sales for the year rose 6 percent to $9.96 billion from $9.44 billion in the prior year.

Street expected the company to earn $12.29 per share for the year on revenues of $9.96 billion.

For fiscal 2015, Grainger now forecasts earnings per share in a range of $12.60 to $13.60, and sales growth of 3 percent to 7 percent. Earlier, the company forecast full-year earnings of $12.90 to $13.80 per share and sales growth of 5 percent to 9 percent.

Analysts expect the company to report earnings of $13.48 per share for the year on 6.7 percent growth in revenues to $10.63 billion.

The revised outlook reflects the current foreign currency translation effect on reported financial results due to the further weakening of the Canadian and Japanese currencies since the company first issued guidance for 2015, as well as the deteriorating macroeconomic environment in Canada.

Ryan said, "Longer term, we remain optimistic about our opportunities in the large and fragmented MRO market. We are committed to our strategy to grow and gain share, and we will continue to invest to create long-term competitive advantage. In the near term, we remain cautious given the low inflationary environment in the United States, economic headwinds internationally and growing pressure from weaker currencies in Canada and Japan."

GWW is currently trading at $240.72, down $7.42 or 3.02 percent on a volume of 89,562 shares.