Global Industrial (NYSE:GIC) Misses Q4 Revenue Estimates

Industrial and commercial distributor Global Industrial (NYSE:GIC) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 5.6% year on year to $302.3 million. Its GAAP profit of $0.27 per share was 3.6% below analysts’ consensus estimates.

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Company Overview

Formerly known as Systemax, Global Industrial (NYSE:GIC) distributes industrial and commercial products to businesses and institutions.

Maintenance and Repair Distributors

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Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Global Industrial’s sales grew at a mediocre 6.3% compounded annual growth rate over the last four years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Global Industrial’s annualized revenue growth of 6.2% over the last two years aligns with its four-year trend, suggesting its demand was consistently weak.

This quarter, Global Industrial missed Wall Street’s estimates and reported a rather uninspiring 5.6% year-on-year revenue decline, generating $302.3 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 3.9% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

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Operating Margin

Global Industrial was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.8% was weak for an industrials business. This result is surprising given its high gross margin as a starting point.

Analyzing the trend in its profitability, Global Industrial’s operating margin decreased by 2.1 percentage points over the last five years. This raises an eyebrow about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. . Global Industrial’s performance was poor no matter how you look at it - it shows costs were rising and that it couldn’t pass them onto its customers.

This quarter, Global Industrial generated an operating profit margin of 4.8%, down 2.2 percentage points year on year. Since Global Industrial’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Global Industrial’s full-year EPS grew at an unimpressive 4.5% compounded annual growth rate over the last five years, worse than the broader industrials sector.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Sadly for Global Industrial, its EPS declined by 12.9% annually over the last two years while its revenue grew by 6.2%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Global Industrial’s earnings to better understand the drivers of its performance. Global Industrial’s operating margin has declined by 2 percentage points over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Global Industrial reported EPS at $0.27, down from $0.40 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Global Industrial’s full-year EPS of $1.57 to grow 5.4%.

Key Takeaways from Global Industrial’s Q4 Results

We were impressed by how significantly Global Industrial blew past analysts’ EBITDA expectations this quarter. On the other hand, its EPS and revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $24.29 immediately after reporting.

Global Industrial’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.