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Grainger (GWW) Stock Surges 31% in a Year: More Room to Run?

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W.W. Grainger, Inc. (GWW - Free Report) shares have gained 30.5% in the past year against the industry’s decline of 31.1%. Strong recovery in demand for non-pandemic products volume and growth in the High-Touch Solutions and Endless Assortment have contributed to this share-price appreciation. Benefits from price realization and cost-reduction actions will also stoke growth.

Grainger reported impressive third-quarter 2021 results, with earnings and sales beating the respective Zacks Consensus Estimates and improving year over year.
 

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s analyze the factors driving the stock.

Driving Factors

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

Grainger projects current year 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 earnings per share (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 boost 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, supported by the continued traction of its growth initiatives. The company intends to generate 300-400 basis points of outgrowth compared with the market by 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 current-year earnings estimate is pegged at $19.60, suggesting year-over-year growth of 21%.

Zacks Rank & Other Stocks to Consider

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

A few other top-ranked stocks in the Industrial Products sector are Greif, Inc. (GEF - Free Report) , SPX Flow and Emerson Electric Co. (EMR - Free Report) . While GEF and FLOW currently flaunt a Zacks Rank #1 (Strong Buy), EMR carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Greif has an estimated earnings growth rate of 11.4% for the current year. In the past 30 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 2%.

In the past year, the company’s shares have gained 31%. Greif has a trailing four-quarter earnings surprise of 16.8%, on average.

SPX Flow has an expected earnings growth rate of 102% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.

SPX Flow’s shares have risen 50.1% in the past year. FLOW has a trailing four-quarter earnings surprise of 40%, on average.

Emerson Electric has a projected earnings growth rate of 19.9% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.

EMR’s shares have appreciated 18.3% in a year. Emerson Electric has a trailing four-quarter earnings surprise of 10.7%, on average.


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