RBC Affirms Grainger (GWW) at 'Underperform'; Prelim. FY17 Outlook Slightly Below Views

November 11, 2016 12:12 PM EST
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Price: $245.66 +0.61%

Rating Summary:
    7 Buy, 14 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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RBC Capital affirms Grainger (NYSE: GWW) at Underperform with a price target of $186 following an October sales of guidance update issued today

The firm noted

  • Preliminary 2017 EPS guidance 2.9% below skeptical consensus; unsurprisingly reaffirms 2016 EPS guidance. At its annual Analyst Meeting on Nov-11, Grainger provided preliminary 2017 EPS guidance of $11.30-$12.40, falling 35c/2.9% short of $12.20 consensus at the midpoint, as well as our $12.25 estimate. We note that the $1.10 wide range is meaningfully tighter than last year’s initial $2.20 wide preliminary range for 2016. Sales are expected to be up 2%-6%, implying roughly $10.6 billion at the midpoint, a touch above $10.5 billion consensus and our $10.4 billion estimate. Unsurprisingly, the 2016 EPS range was reiterated.
  • October daily sales flat as-expected; preliminary November sales weaker and “slightly below” October on easier comp. Following Fastenal’s better October update, expectations for October were slightly elevated, and they ultimately came in as-expected at flat overall, with organic sales also flat. For November, total sales are trending “slightly below” October, though this is on an easier comp, and implies some underlying deceleration on a two-year-stack. We view this as a negative incremental development.

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