W.W. Grainger, Inc.’s GWW second-quarter 2018 adjusted earnings per share of $4.37 improved 9% year over year. Further, earnings beat the Zacks Consensus Estimate of $3.78 by a significant margin of 16%. Grainger’s stellar second-quarter performance was driven by higher sales, operating expense leverage, lower tax rate and share count. Including one-time items, such as restructuring charges and other charges, earnings came in at $4.16 per share in the reported quarter, soaring 149% from $1.67 recorded in the year-ago quarter. Grainger reported revenues of $2,860 million, up 9% from the prior-year quarter figure of $2,615 million. This was driven by an increase of 9 percentage point (pp) from volume growth, 1 pp from volume and 1 pp from foreign exchange, partially offset by a decline of 1 pp from the divestiture of a specialty business. The revenue figure also beat the Zacks Consensus Estimate of $2,820 million. W.W. Grainger, Inc. Price, Consensus and EPS Surprise W.W. Grainger, Inc. price-consensus-eps-surprise-chart | W.W. Grainger, Inc. QuoteOperational UpdateAdjusted cost of sales increased 11% year over year to $1,748 million. Adjusted gross profit climbed 7% to $1,112 million from $1,042 million recorded in the year-ago quarter. Gross margin contracted 100 basis points (bps) to 38.9%.Grainger’s adjusted operating income in the reported quarter increased 23% to $359 million from $291 million recorded in the prior-year quarter aided by higher sales and strong operating expense leverage. Adjusted operating margin expanded 150 bps to 12.6% in the quarter from 11.1% in the year-earlier quarter. Financial Position Grainger had cash and cash equivalents of $312 million at the end of second-quarter 2018 compared with $327 million at the end of 2017. Cash provided by operating activities increased to $394 million in the first half of fiscal 2018 compared with $372 million in the prior-year comparable period. Long-term debt was $2.21 billion as of Jun 30, 2018, compared with $2.25 billion as of Dec 31, 2017. During the second quarter, the company returned $111 million in cash to shareholders through $83 million in dividends and $28 million to buy back 96,000 shares. Guidance Backed by the quarter’s performance, Grainger raised 2018 sales and earnings per share guidance. The company now expects sales to be up 5.5-8.5% compared with the prior guidance of 5-8%. Further, the outlook for earnings per share is now $15.05-$16.05, from the prior band of $14.30-$15.30. Share Price Performance Over the past year, Grainger outperformed the industry with respect to price performance. The stock has gained 75% compared with 49% growth registered by the industry. Zacks Rank & Other Key Picks Grainger carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same space include Actuant Corporation ATU, DMC Global Inc. BOOM and Chart Industries, Inc. GTLS. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Actuant has a long-term earnings growth rate of 15.6%. Its shares have gained 17% over the past year. DMC Global has a long-term earnings growth rate of 20%. The company’s shares have appreciated a whopping 269% in the past year. Chart Industries has a long-term earnings growth rate of 26.9%. The stock has surged 91% in a year’s time. Looking for Stocks with Skyrocketing Upside? Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Actuant Corporation (ATU): Free Stock Analysis Report Chart Industries, Inc. (GTLS): Free Stock Analysis Report DMC Global Inc. (BOOM): Free Stock Analysis Report W.W. Grainger, Inc. (GWW): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research