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Grainger (GWW) Up 19% in 6 Months: What's Driving the Rally?
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W.W. Grainger, Inc. (GWW - Free Report) shares have gained 19% in the past six months against the industry’s decline of 31.5%. Strong growth in core, non-pandemic products volume as well as growth in the High-Touch Solutions market and Endless Assortment have contributed to the upside. Benefits from price realization and cost-reduction actions will also stoke growth.
Grainger reported impressive fourth-quarter 2021 results, with earnings and sales beating the respective Zacks Consensus Estimates and improving year over year.
Image 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 strong growth in core, non-pandemic product, primarily in the United States. Pandemic product sales also remained elevated throughout 2021. The Endless Assortment segment is gaining from strong customer acquisition at Zoro and MonotaRO business. This momentum will continue in the current year as well.
Grainger projects current-year net sales between $14.1 billion and $14.5 billion. In 2021, the company had reported sales of $13 billion. The company expects total daily sales growth between 7.5% and 10.5%. It anticipates earnings per share (EPS) in the band of $23.50-$25.50 for 2022, calling for year-over-year growth of 18.5-28.5%. GWW’s margin will continue to gain traction from improved pandemic product mix, pricing actions and its ability to navigate supply chain challenges.
Grainger is investing in the non-pandemic product inventory and partnering with suppliers to mitigate supply-related challenges, inbound lead time challenges and any possible cost increases. The company expects non-pandemic sales growth to boost first-quarter 2022 results.
Grainger continues to outpace the U.S. maintenance, repair and operating (MRO) market, supported by the continued traction of its growth initiatives. In 2021, its High-Touch Solutions market exceeded the U.S. MRO market by 100 basis points (bps) from the prior year’s levels and achieved 450 basis points growth on a two-year average. For 2022, Grainger expects this market to grow between 7% and 10%, 300 bps above the estimated U.S. MRO market growth of 4-7%. Strategic activities such as building advantaged MRO solutions, delivering unparalleled customer service and offering differentiated sales and services will aid growth.
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 company continues to develop online capabilities that promote a personalized, relevant, effortless experience for each customer through Grainger.com, eProcurement connections, 1 solutions and mobile applications.
Positive Growth Projections
The company’s current-year earnings estimate is pegged at $24.60, suggesting year-over-year growth of 23.9%.
Zacks Rank & Stocks to Consider
Grainger currently carries a Zacks Rank #3 (Hold).
Applied Industrial Technologies reported adjusted EPS of $1.46 in second-quarter fiscal 2022 (ended Dec 31, 2021), up 49% year on year and beating the Zacks Consensus Estimate of $1.09. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.
Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal year earnings has moved up 9.4% in the past 60 days. AIT’s shares have appreciated 9% in a year.
Sonoco’s fourth-quarter 2021 adjusted EPS increased 9.8% year over year to 90 cents, beating the Zacks Consensus Estimate of 89 cents. SON has a trailing four-quarter earnings surprise of 1.74%, on average.
Sonoco has an estimated earnings growth rate of around 30.9% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 18.3%.
Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.
Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. In a year, SLGN has moved up 1%.
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Grainger (GWW) Up 19% in 6 Months: What's Driving the Rally?
W.W. Grainger, Inc. (GWW - Free Report) shares have gained 19% in the past six months against the industry’s decline of 31.5%. Strong growth in core, non-pandemic products volume as well as growth in the High-Touch Solutions market and Endless Assortment have contributed to the upside. Benefits from price realization and cost-reduction actions will also stoke growth.
Grainger reported impressive fourth-quarter 2021 results, with earnings and sales beating the respective Zacks Consensus Estimates and improving year over year.
Image 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 strong growth in core, non-pandemic product, primarily in the United States. Pandemic product sales also remained elevated throughout 2021. The Endless Assortment segment is gaining from strong customer acquisition at Zoro and MonotaRO business. This momentum will continue in the current year as well.
Grainger projects current-year net sales between $14.1 billion and $14.5 billion. In 2021, the company had reported sales of $13 billion. The company expects total daily sales growth between 7.5% and 10.5%. It anticipates earnings per share (EPS) in the band of $23.50-$25.50 for 2022, calling for year-over-year growth of 18.5-28.5%. GWW’s margin will continue to gain traction from improved pandemic product mix, pricing actions and its ability to navigate supply chain challenges.
Grainger is investing in the non-pandemic product inventory and partnering with suppliers to mitigate supply-related challenges, inbound lead time challenges and any possible cost increases. The company expects non-pandemic sales growth to boost first-quarter 2022 results.
Grainger continues to outpace the U.S. maintenance, repair and operating (MRO) market, supported by the continued traction of its growth initiatives. In 2021, its High-Touch Solutions market exceeded the U.S. MRO market by 100 basis points (bps) from the prior year’s levels and achieved 450 basis points growth on a two-year average. For 2022, Grainger expects this market to grow between 7% and 10%, 300 bps above the estimated U.S. MRO market growth of 4-7%. Strategic activities such as building advantaged MRO solutions, delivering unparalleled customer service and offering differentiated sales and services will aid growth.
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 company continues to develop online capabilities that promote a personalized, relevant, effortless experience for each customer through Grainger.com, eProcurement connections, 1 solutions and mobile applications.
Positive Growth Projections
The company’s current-year earnings estimate is pegged at $24.60, suggesting year-over-year growth of 23.9%.
Zacks Rank & Stocks to Consider
Grainger currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Applied Industrial Technologies, Inc. (AIT - Free Report) , Sonoco Products Company (SON - Free Report) and Silgan Holdings Inc. (SLGN - Free Report) . While AIT sports a Zacks Rank #1 (Strong Buy), SON and SLGN carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies reported adjusted EPS of $1.46 in second-quarter fiscal 2022 (ended Dec 31, 2021), up 49% year on year and beating the Zacks Consensus Estimate of $1.09. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.
Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal year earnings has moved up 9.4% in the past 60 days. AIT’s shares have appreciated 9% in a year.
Sonoco’s fourth-quarter 2021 adjusted EPS increased 9.8% year over year to 90 cents, beating the Zacks Consensus Estimate of 89 cents. SON has a trailing four-quarter earnings surprise of 1.74%, on average.
Sonoco has an estimated earnings growth rate of around 30.9% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 18.3%.
Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.
Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. In a year, SLGN has moved up 1%.