W.W. Grainger, Inc. ( GWW - Analyst Report ) recently delivered its 8th consecutive positive earnings surprise on record first quarter sales. And management raised its guidance for the remainder of 2012, prompting analysts to revise their estimates higher too.

It is a Zacks #2 Rank (Buy) stock.

Grainger also recently announced a 21% increase in its quarterly dividend, marking the company's 41st consecutive year of increased dividends. It currently yields 1.7%.

Company Description

Grainger distributes maintenance, repair, and operating (MRO) supplies such as motors, tools, fasteners, and safety gear.

It is headquartered in Lake Forest, Illinois and has a market cap of $13.1 billion.

First Quarter Results

Grainger delivered better than expected first quarter results on April 17. Earnings per share came in at $2.57, beating the Zacks Consensus Estimate by 6 cents. It was an 18% increase over the same quarter last year.

Sales rose 16% to $2.2 billion, driven by a 10% increase in volume and a 3% increase in price. Sales were up 11% in the U.S. and 13% in Canada.

Operating income increased 16% year-over-year, as the gross margin expanded from 44.0% to 44.4% of sales.

Guidance Raised

Following strong Q1 results, management raised its guidance for the remainder of 2012. The company stated "given the opportunity in the MRO market, coupled with continued investments in our proven growth drivers, we remain confident in our strategy and the prospects for future growth. We also expect to generate better earnings leverage as the year progresses."

The company expects to earn between $10.40 and $10.80 per share on sales growth of 12-14%, up from previous guidance of $9.90-$10.65 on 10-14% top-line growth.

This prompted analysts to revise their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy) stock.

The Zacks Consensus Estimate for 2012 is now $10.72, within guidance, and representing 19% growth over 2011 EPS. The 2013 consensus is currently 15% higher at $12.30.

As you can see from Grainger's Price & Consensus chart, consensus estimates have steadily risen over the last several months as the company has delivered 8 straight positive earnings surprises:

Dividend Raised

Along with rising earnings estimates has come a rising dividend. The company recently announced a 21% increase in its quarterly dividend, marking the company's 41st consecutive year of increased dividends.

It currently yields a solid 1.7%.

Reasonable Valuation

Despite strong first quarter results, increased guidance and rising estimates, shares of GWW have sold off considerably during the recent market pullback.

Shares now trade around 17.5x forward earnings, in-line with its historical median.

The Bottom Line

With very strong earnings momentum, a bullish outlook from management, a rising dividend and reasonable valuation, Grainger offers investors a lot to like.