* Q3 sales rise 11 percent
* Q3 EPS $1.79 beats estimates of $1.53
* Raises 2008 earnings forecast (Recasts, adds details, analysts’ comments, share movement)
By Bhaswati Mukhopadhyay
BANGALORE, Oct 14 (Reuters) - Building maintenance supply company W.W. Grainger Inc (GWW.N) posted better-than-expected third-quarter results, driven by expansion of its product line and market, and its shares rose as much as 8 percent.
Despite the economic uncertainty, Grainger still raised its earnings outlook for the year to a range of $6.00 to $6.20 a share from its prior view of $5.80 to $6.10 a share.
“They obviously recognize that we are in a more uncertain macroeconomic environment and they left the range fairly wide to allow for that flexibility,” Brent Rakers, an analyst with Morgan, Keegan & Co, said.
Analyst John Baliotti of FTN Midwest Securities Corp believes that the company’s focus on the MRO (maintenance, repair, operations) side of business, which is less volatile and less discretionary, is helping growth.
Both the analysts said government orders, which constitute about 20 percent of Grainger’s revenue, is also a key driver. Grainger distributes lighting, motors, janitorial supplies and other materials used to maintain and repair buildings.
For the third quarter, net income rose 28 percent to $140 million, or $1.79 a share, while revenue increased 11 percent to $1.83 billion.
Analysts on average were expecting earnings of $1.53 a share, before special items, on revenue of $1.80 billion, according to Reuters Estimates.
Baliotti of FTN Midwest said the company’s strong results reflected some decisions taken about five years ago.
Logistics network at the distribution centres, market expansion, product line expansion and the alignment of sales force are the strategies that are paying off now, he added.
Baliotti also said Grainger is benefiting from the current slowdown because of its scale of operations as its local competitors, who control about 80 percent of the market, do not have enough cash to keep the inventory on the shelves.
Both the analysts have their top ratings on the Chicago-based company’s stock, which was up $4.96 at $85.41 in afternoon trade on the New York Stock Exchange. (Editing by Anil D’Silva)