What happened
Shares of industrial supplier WW Grainger Inc (GWW -1.30%) jumped as much as 17.4% in trading Wednesday after the company reported fourth-quarter results that topped expectations. As of 11:30 a.m. EST, shares were still 14% higher on the day.
So what
Revenue was up 6.5% to $2.63 billion on an 11% increase in volume sold, and net income nearly tripled to $151.1 million, or $2.63 per share. On an adjusted basis, which pulls out one-time items, earnings per share were up 20% to $2.94. Analysts were expecting $2.57 billion in revenue and $2.18 in adjusted earnings per share, so this was a big earnings beat for Grainger.
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Operating margin improved 200 basis points in the biggest sign of the business' improvement. Management has cut some less profitable products from its lineup, which has allowed the company to lower prices and improve margins at the same time.
Now what
Grainger has had two great quarters in a row and has demonstrated it can grow the top line while expanding margins. That combination is welcome news for investors and has driven the stock to a new 52-week high today. The one concern for investors is that shares trade at 23 times trailing adjusted earnings, which is a steep price for a company that's going to grow in mid-single digits at best. But investors don't seem to think the price is steep today, and that has shares soaring.
