I analyzed Grainger for the first time not so long ago – at the beginning of April (read more). It seemed for me as neutrally valued company with huge buybacks coming. Share are still way above January lows, mainly because oil prices rebounded and there are expectations for financial results to improve (I expected some pressure on revenues/profits from Oil & Gas segment).

What’s happened in Q1 2016?

From financial point of view it was a boring quarter (for long term investors boring quarters are not bad).

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We can see that revenues increased slightly, EPS decreased a little bit (due to restructuring charges).

Geographically it is worth to emphasize growth in Other Businesses (here is e-commerce). Seems impressive as growth is around 50%, but most of it (around 100m) was caused by acquisition of Cromwell on September 1.

Decline in Canada was caused by oil and gas segment – expected and here I see potential for reversal/growth.

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Company narrowed guidance for 2016. EPS between $11.00 to $12.80. It is not a game changer, as numbers were expected by investors.

In the 2016 first quarter, Grainger returned $245 million to shareholders through $73 million in dividends and $172 million to buy back 893,000 shares of stock – awesome, almost 2% return in single quarter.

 

Summing up, I am considering buying Grainger but I am still waiting for lower share price. After a second look on company I am wondering whether P/E around 20 is neutral valuation… I see it rather demanding, especially taking into account that buybacks will be probably founded with debt.

 

Disclosure GWW – no position