Grainger (GWW) Updates on FY16 - 17 Guidance; EPS Flat with Consensus Views

November 11, 2016 11:26 AM EST

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Grainger (NYSE: GWW) held its Annual Analyst Meeting in Lake Forest, Illinois. DG Macpherson, Grainger Chief Executive Officer, hosted the event. The meeting also included presentations from other Grainger leaders.

"Over the past several years, we have invested to position our business for long-term success and meet the evolving needs of our customers," said Chief Executive Officer DG Macpherson. He added, "We are leveraging these investments to provide unique value to customers of all types and sizes. And, we expect to enhance our industry-leading customer experience by making our pricing simpler and more relevant to drive faster growth and stronger share gain in our U.S. business for a broader set of customers. We expect that these actions, along with continued reductions in our cost structure and a turn-around of our business in Canada, will improve our financial performance and strengthen returns to shareholders," Macpherson concluded.

As part of the meeting, Grainger provided the following outlook for sales and earnings in 2016 and 2017, adjusted for special items that the company believes are not indicative of ongoing operations:

  • For the 2016 fourth quarter, the company is forecasting sales of -1 to 3 percent and expects earnings per share of $2.27 to $2.57. (The Street sees EPS of $2.41.)
  • For the full year 2016, the company reiterated its sales forecast of 1.5 to 2.5 percent and earnings per share guidance of $11.40 to $11.70. (The Street sees EPS of $11.53.)
  • For the full year 2017, the company is forecasting sales growth of 2 to 6 percent and earnings per share of $11.30 to $12.40. (The Street sees EPS of $12.24.)

Grainger also updated its longer term operating margin targets. The company now expects operating margins, excluding special items that the company believes are not indicative of ongoing operations, to increase from a range of 11.7 to 12.2 percent in 2017 to a range of 13 to 14 percent by the year 2021. This 25 to 50 basis point improvement per year is expected to come from organic sales growth in the mid to high single-digits and continued strong cost productivity. In addition, Grainger expects its Return on Invested Capital (ROIC)* to improve from a range of 24 to 26 percent in 2017 to 31 to 33 percent in 2021 driven by higher sales and operating margins, lower capital spending and increased productivity across its existing asset base.

Information presented at the Annual Analyst Meeting, including details supporting the company's guidance and longer term expectations, can be found in the News and Events section of the Investor Relations website, www.grainger.com/investor.



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