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Industrial and commercial distributor Global Industrial (NYSE:GIC) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 6.8% year on year to $347.8 million. It made a GAAP profit of $0.52 per share, down from its profit of $0.56 per share in the same quarter last year.
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Global Industrial (GIC) Q2 CY2024 Highlights:
- Revenue: $347.8 million vs analyst estimates of $348.8 million (small miss)
- EPS: $0.52 vs analyst expectations of $0.52 (in line)
- Gross Margin (GAAP): 35.2%, up from 34.7% in the same quarter last year
- Free Cash Flow of $17.9 million, up from $5.1 million in the previous quarter
- Market Capitalization: $1.34 billion
Formerly known as Systemax, Global Industrial (NYSE:GIC) distributes industrial and commercial products to businesses and institutions.
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Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Unfortunately, Global Industrial's 7.3% annualized revenue growth over the last five years was mediocre. This shows it couldn't expand in any major way and is a tough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Global Industrial's annualized revenue growth of 8.3% over the last two years is above its five-year trend, suggesting some bright spots.
This quarter, Global Industrial grew its revenue by 6.8% year on year, and its $347.8 million of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 3% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Global Industrial has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8%, higher than the broader industrials sector.
Looking at the trend in its profitability, Global Industrial's annual operating margin might have seen some fluctuations but has remained more or less the same over the last five years. Shareholders will want to see Global Industrial grow its margin in the future.
In Q2, Global Industrial generated an operating profit margin of 7.6%, down 1.6 percentage points year on year. Since Global Industrial's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Global Industrial's EPS grew at an unimpressive 5.1% compounded annual growth rate over the last five years, lower than its 7.3% annualized revenue growth. However, its operating margin didn't change during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
We can take a deeper look into Global Industrial's earnings to better understand the drivers of its performance. A five-year view shows Global Industrial has diluted its shareholders, growing its share count by 1.3%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Global Industrial, its two-year annual EPS declines of 21.3% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Global Industrial reported EPS at $0.52, down from $0.56 in the same quarter last year. This print was close to analysts' estimates. Over the next 12 months, Wall Street expects Global Industrial to grow its earnings. Analysts are projecting its EPS of $1.80 in the last year to climb by 18% to $2.13.
Key Takeaways from Global Industrial's Q2 Results Overall, this was a fine quarter for Global Industrial with key figures such as revenue and EPS largely in line with expectations. The stock remained flat at $35.80 immediately after reporting.
