Grainger Earnings Beat Estimates in Q4, Sales Increase Y/Y

Core Insights - W.W. Grainger, Inc. (GWW) reported adjusted earnings per share (EPS) of $9.44 for Q4 2025, slightly exceeding the Zacks Consensus Estimate of $9.43, but down from $9.71 in the same quarter last year [1] - Quarterly sales increased by 4.5% year over year to $4.43 billion, surpassing the Zacks Consensus Estimate of $4.40 billion [1] - Daily sales also rose by 4.5% compared to the prior-year quarter, although the predicted increase was 4.9% [1] Segment Performance - The High-Touch Solutions N.A. segment saw daily sales growth of 2.2% year over year, driven by growth in the U.S. and Canada, while the predicted growth was 3.4% [2] - The Endless Assortment segment experienced a significant daily sales increase of 14.3% year over year, attributed to strong performances from MonotaRO and Zoro, although the model predicted 18.2% growth [2] Operational Update - Cost of sales rose by 4.8% year over year to $2.68 billion, while gross profit increased by 4.2% to $1.74 billion, resulting in a gross margin of 39.5%, slightly down from 39.6% in the previous year [3] - Selling, general and administrative expenses increased by 6.6% to $1.11 billion, leading to an operating income of $634 million, which is a 0.2% increase year over year, with an operating margin of 14.3% compared to 15% in the prior-year quarter [3] Cash Flow & Balance Sheet - At the end of 2026, cash and cash equivalents were $0.59 billion, down from $1.04 billion at the end of 2024, with cash flow from operating activities at $2.02 billion compared to $2.11 billion the previous year [4] - Long-term debt increased to $2.36 billion as of December 31, 2025, from $2.28 billion a year earlier, with $1.5 billion returned to shareholders through dividends and share buybacks in 2025 [4] 2025 Performance - Adjusted EPS for 2025 decreased by 9% year over year to $35.40, missing the Zacks Consensus Estimate of $39.45 and falling short of the company's expected range of $39.00-$39.75 [5] - Sales for the year improved by 4.5% to $17.94 billion, aligning with the company's guidance of $17.8-$18 billion and exceeding the Zacks Consensus Estimate of $17.92 billion [5] 2026 Outlook - The company anticipates net sales between $18.7 billion and $19.1 billion for 2026, with expected sales growth of 4.2-6.7% and daily sales growth projected at 6.5-9% [6] - Earnings per share are forecasted to be in the range of $42.25-$44.75 [6] Stock Performance - Over the past year, GWW shares have increased by 5.7%, outperforming the industry's breakeven performance [8]