W.W. Grainger, Inc.’s GWW fourth-quarter 2016 adjusted earnings per share of $2.45 declined 2% from the prior-year figure of $2.49. However, earnings beat the Zacks Consensus Estimate of $2.36.

Including one-time items, earnings were $1.01 per share in the reported quarter, down significantly from $2.30 in the year-ago quarter.

Operational Update

Grainger reported revenues of $2,471 million, down 0.3% from the prior-year quarter figure of $2,478 million. However, it marginally beat the Zacks Consensus Estimate of $2,446 million. There were 63 selling days in the reported quarter, one fewer than in the 2015 quarter.

On a daily basis, total company sales were up 1% for the quarter. The sales increase for the quarter included a 1 percentage point (pp) increase from volume and a 1 pp increase from the timing of the holidays in December, offset by a 1 pp reduction in price.

Cost of sales inched up 0.3% year over year to $1,481 million. Gross profit decreased 1.3% to $989.7 million from $1,002 million in the year-ago quarter. Gross margin contracted 30 basis points to 40.1% due to unfavorable customer mix and price deflation exceeding product cost deflation.

Grainger’s adjusted operating income in the quarter went down 2.5% to $274.8 million from $281.9 million in the prior-year quarter. Operating margin fell to 11.1% in the quarter from 11.4% in the prior-year quarter.

Segment Performance

Revenues for the U.S. segment dipped 1.3% year over year to $1,897 million. Adjusted operating income for the segment decreased 2.7% year over year to $300.3 million.

Revenues of $181.4 million from the Canadian Acklands-Grainger business were down 11% in U.S. dollars and local currency from the year-ago quarter. The segment reported an adjusted operating loss of $10.7 million, against an operating income of $7.9 million in the prior-year quarter.

Revenues from Other businesses (which include Asia, Europe and Latin America) increased 11% year over year to $483.5 million. The segment’s adjusted operating profit soared 63% to $16.7 million, from $10.2 million in the prior-year quarter.

Financial Position

At the end of 2016, Grainger generated cash and cash equivalents of $274 million, which declined from $290 million at the end of 2015. Cash flow from operations came in at $1,003 million for the fiscal 2016 compared with $989.9 million in the prior fiscal.

At the end of 2016, Grainger’s long-term debt increased to $1,841 million, compared with $1,388 million at the end of 2015. During the year, the company returned $1.1 billion in cash to its shareholders in the form of share repurchases and dividends.

2016 Performance

Grainger reported adjusted earnings per share of $11.58 in 2016, down 3% from $11.94 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $11.50 per share. Including one-time items, the bottom line came in at $9.87, down 15% from $11.58 recorded in 2015.

Revenues grew 2% year over year to $10.1 billion from $10 billion in 2015. Revenues came in line with the Zacks Consensus Estimate.

Guidance

Grainger reaffirmed its sales growth guidance of 2–6% for full-year 2017 and earnings per share of $11.30–$12.40.

Grainger will progress on key initiatives, including sales force effectiveness and vertical alignment of the sales force in the U.S., the medium-sized customer acquisition and growth of the online model globally. The company remains focused on creating value for customers, delivering a seamless customer experience and reducing costs in 2017.