Summary
W.W. Grainger, Inc. reported a significant increase in sales and earnings for the third quarter and first nine months of 2010 compared to the same periods in 2009. Net sales for the third quarter rose by 19.5% to $1.9 billion, driven by a combination of volume increases and acquisitions, with particular strength in the manufacturing and reseller customer segments. This sales growth, coupled with improved gross profit margins and operating expense management, led to a 34.6% increase in operating earnings and a 4.0% rise in net earnings attributable to W.W. Grainger, Inc., reaching $150.4 million ($2.06 per diluted share). The positive momentum carried through the first nine months of 2010, with net sales up 16.7% to $5.36 billion and net earnings increasing by 13.6% to $378.7 million ($5.10 per diluted share). The company is investing in growth initiatives, including expanding its sales force and eCommerce capabilities, and has raised its full-year 2010 guidance for sales growth to 14-15% and earnings per share to $6.40-$6.70. Despite the positive financial performance, investors should note ongoing discussions with the DOJ and USPS regarding contract compliance and pricing, although the company believes it has complied in all material respects and does not expect these to have a material adverse financial impact.
Financial Highlights
50 data points| Revenue | $1.90B |
| Cost of Revenue | $1.11B |
| Gross Profit | $789.72M |
| SG&A Expenses | $538.45M |
| Operating Income | $251.27M |
| Interest Expense | $1.95M |
| Net Income | $150.41M |
| EPS (Basic) | $2.10 |
| EPS (Diluted) | $2.06 |
| Shares Outstanding (Basic) | 69.92M |
| Shares Outstanding (Diluted) | 71.17M |
Key Highlights
- 1Strong Sales Growth: Net sales increased by 19.5% year-over-year to $1.9 billion for Q3 2010 and by 16.7% for the first nine months of 2010 to $5.36 billion.
- 2Earnings Improvement: Diluted EPS grew by 9.6% to $2.06 in Q3 2010 and by 17.5% to $5.10 for the nine-month period, excluding certain one-time items.
- 3Acquisition Contribution: Business acquisitions contributed approximately 5% to sales growth in Q3 and 9 months of 2010.
- 4Segment Performance: The US segment saw a 15.0% sales increase in Q3, while Canada experienced a 21.6% increase. 'Other Businesses' also showed substantial growth, particularly due to the inclusion of Japan and Colombia.
- 5Increased Shareholder Returns: The company repurchased $504.4 million of treasury stock in the first nine months of 2010, a significant increase from $127.7 million in the prior year period.
- 6Raised Full-Year Guidance: Grainger increased its 2010 sales growth guidance to 14-15% and EPS guidance to $6.40-$6.70.
- 7Ongoing Legal Discussions: The company is engaged in ongoing discussions with the DOJ and USPS regarding pricing compliance under government contracts, though it maintains its compliance and does not anticipate a material adverse effect.