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Grainger (GWW) Hits 52-Week High: What's Driving the Upside?

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W.W. Grainger, Inc. (GWW - Free Report) scaled a fresh 52-week high of $499 during the trading session on Nov 23, before retracting a bit to close at $498. The company’s better-than-expected third-quarter 2021 results, strong demand recovery in non-pandemic product volumes and growth in the High-Touch Solutions and Endless Assortment are driving the share-price appreciation.

Price Performance

The company’s shares have gained 21.9% in the past year against the industry’s decline of 26%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Earnings & Sales Beat Estimates in Q3: Grainger reported third-quarter 2021 adjusted earnings per share (EPS) of $5.65, beating the Zacks Consensus Estimate of $5.31. The bottom line increased 25% year over year. Revenues of $3,372 million surpassed the Zacks Consensus Estimate of $3,330 million and rose 12% year over year.

Driving Factors

In the High Touch Solutions North America (N.A) segment, Grainger witnessed year-on-year revenue improvement in nearly all the end markets in third-quarter 2021, driven by a strong recovery in core, non-pandemic product volume. Pandemic product sales also remained elevated during the quarter.  The Endless Assortment segment delivered 14.9% top-line growth year over year, courtesy of strong customer acquisition at Zoro U.S. business. This momentum will continue in the fourth quarter as well.

Grainger projects 2021 net sales between $12.7 billion and $13 billion. In 2020, the company had reported sales of $11.8 billion. The company expects total daily sales growth between 11.5% and 12.5%. It anticipates EPS in the band of $19.00-$20.50 for 2021, calling for year-over-year growth of 17.5-26.5%.

Grainger is investing in the non-pandemic product inventory and partnering with suppliers to mitigate the supply-related challenges, inbound lead-time challenges and any possible cost increases. Grainger expects non-pandemic sales growth to positively impact fourth-quarter results. Benefits from price realization are likely to drive margin in the quarter.

Grainger continues to outpace the U.S. maintenance, repair and operating (MRO) market, highlighting the continued traction of its growth initiatives. The company is focused on driving 300-400 basis points of outgrowth compared with the market by focusing on strategic activities, like building advantaged MRO solutions, delivering unparalleled customer service and offering differentiated sales and services. It will continue its efforts to strengthen relationships with large- and mid-sized customers to improve the sales-force effectiveness.

Grainger is focused on improving the end-to-end customer experience by making investments in its e-commerce and digital capabilities as well as executing improvement initiatives within the supply chain. The pandemic also provided a significant boost to its e-retail sales.

Positive Growth Projections

The company’s earnings estimate for the current year is pegged at $19.58, suggesting year-over-year growth of 21%.

Zacks Rank & Other Stocks to Consider

Grainger currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Industrial Products sector are Encore Wire Corporation (WIRE - Free Report) , Heritage-Crystal Clean, Inc. (HCCI - Free Report) and Casella Waste Systems, Inc. (CWST - Free Report) . All of these stocks flaunt a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encore Wire has an expected earnings growth rate of around 491% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 37% upward in the past 60 days.

Encore Wire’s shares have surged 171% in the past year. The company has a trailing four-quarters earnings surprise of 271%, on average.

Heritage-Crystal has a projected earnings growth rate of around 553% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 9.3% in the past 60 days.

The company’s shares have appreciated 65% in a year. Heritage-Crystal has a trailing four-quarter earnings surprise of 62.3%, on average. HCCI has a long-term earnings growth of 15%.

Casella Waste has an estimated earnings growth rate of around 6% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 11.4%.

The company’s shares have increased 44% in the past year. Casella Waste has a trailing four-quarter earnings surprise of 42.1%, on average. CWST has a long-term earnings growth of 14.2%.