NEW YORK (AP) — W.W. Grainger Inc. surpassed most Wall Street expectations in the first quarter thanks to its ability to raise prices.
The industrial supply company reported its quarterly results after the market closed on Monday and in addition to unexpectedly health margins, Grainger boosted its outlook for the year. The Chicago company is now forecasting an annual profit of $8.10 to $8.60 per share, and says its revenue will rise by as much as 10 percent, to a range of $7.68 billion to $7.9 billion.
Analysts expected a profit of $8.32 per share for the year, according to FactSet, and projected $7.82 billion in revenue, which represents growth of 9 percent
"Grainger's 1Q performance was terrific, bolstered by its being able to implement price increases ahead of inflation, contributing to an impressive gross margin," Raymond James analyst Sam Darkatsh
Darkatsh maintained his "Market Outperform" rating on the stock.
Margins won't be quite as strong for the rest of the year, Darkatsh said, and he expects Grainger to report slower sales growth later in 2011, but so will competitors and Grainger remains his top pick.
Sales to all customer markets were strong, with heavy manufacturing companies and resellers growing the most, pointed out Oppenheimer & Co. analyst Christopher Glynn.
Grainger's margins were especially strong because it was able to increase prices while suppliers did not, Citi Investment Research analyst Deane Dray said.
However, Dray does not expect the company to be able to pass on further price increases to suppliers. .
Darkatsh and Glynn rate Grainger shares at the equivalent of "Buy," while Dray rates the stock "Sell."