16.11.2005 19:07:00
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Grainger Provides 2006 Outlook
CHICAGO, Nov. 16 /PRNewswire-FirstCall/ -- Grainger , the leading North American industrial supplier of products to maintain, repair and operate facilities, conducted its annual analyst meeting in Houston, Texas today. Grainger Chairman and Chief Executive Officer Richard L. Keyser presented a strategic outlook, James T. Ryan, Group President, described several key growth programs and P. Ogden Loux, Senior Vice President, Finance and Chief Financial Officer, provided guidance for 2006.
"Our growth strategies are playing out well and are delivering improved performance," said Keyser. He announced that the company is raising its long-term operating margin target to a range of 10 to 12 percent from the previously stated range of 9 to 10 percent. "Going forward, we are confident that maintaining our sales momentum, investing in projects above our cost of capital and achieving higher operating margins will create tremendous value for our shareholders."
Ryan spoke to the four things companies need to succeed in the industrial distribution space: integrated information systems, an efficient supply chain, robust customer coverage and a broad product offering. He explained that Grainger has made differential investments in each of these areas. This unique combination of capabilities, coupled with the company's size and scale, provide Grainger with distinct competitive advantages for delivering superior customer service.
Ryan also provided an update on the company's multi-year market expansion program. Given the strong performance trends seen to date, the company raised its forecast for program-related sales and earnings for 2005 through 2013. The company now expects market expansion program sales of approximately $120 to $140 million this year, with projected revenues growing to approximately $245 to $275 million in 2006. "By 2013, we now expect this program to deliver approximately $1.1 billion in sales and $200 million in operating earnings," Ryan said. He added that the company plans to make its product line even broader, with new products expected to contribute approximately 1 percentage point to sales growth next year.
Loux addressed company expectations for 2005 and 2006. Sales for the year are expected to be approximately $5.5 billion. The company recently announced that daily sales in October 2005 were up 11 percent versus October 2004. Loux also reiterated company EPS guidance for 2005 of $3.60 to $3.70.
For 2006, the company expects revenues to grow 8 to 11 percent. The company's forecast is based on economic assumptions of GDP and industrial production growth of 3 to 4 percent for 2006. The company anticipates earnings per share in 2006 to be between $4.15 and $4.30, before the effect of expensing stock options under FAS 123R. Cash flow from operations for 2006 is expected to be in the range of $425 to $475 million, with planned uses including funding capital expenditures of $140 to $175 million and share repurchases of $150 to $200 million.
Keyser concluded by recognizing the contributions of the company's employees. "Our team has talent, heart and the passion to win. It's that spirit which ultimately shapes our response to customer needs and delivers value to shareholders," said Keyser.
Presentations from the meeting are available on the investor relation's section of Grainger's Web site, http://www.grainger.com/ .
W.W. Grainger, Inc. , with 2004 sales of $5 billion, is the leading broad line supplier of facilities maintenance products serving businesses and institutions throughout North America. Through a network of nearly 600 branches, 18 distribution centers and multiple Web sites, Grainger helps customers save time and money by providing them with the right products to keep their facilities running.
This document contains forward-looking statements under the federal securities laws. The forward-looking statements relate to the company's expected future financial results and business plans, strategies, and objectives and are not historical facts. They are generally identified by qualifiers such as "outlook," "guidance," "target," "going forward," "trends," "forecast," "expects," "plans," "projected," "EPS guidance," "anticipates," expected," "planned," or similar expressions. There are risks and uncertainties the outcome of which could cause the company's results to differ materially from what is projected. The forward-looking statements should be read in conjunction with the company's most recent annual report, as well as the company's Form 10-K and other reports filed with the Securities and Exchange Commission, containing a discussion of the company's business and of various factors that may affect it.
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