On Sep 17, we issued an updated research report on W.W. Grainger, Inc. (GWW Quick QuoteGWW - Free Report) . Favorable markets, continued investments in e-commerce and digital capabilities, focus on strengthening the large and mid-sized customer base, and the latest tax reform are expected to drive growth for the company.

 

 

Backed by second-quarter 2018 performance, Grainger expects fiscal 2018 sales to be up 5.5-8.5% year over year. Volume growth is anticipated to outpace the market by 300-plus basis points this year. Further, the outlook for earnings per share is in the band of $15.05-$16.05. Operating margin is expected to range between 11.5% and 11.9%. Grainger expects price mix to improve and 50 basis points of COGS deflation for the year, driven by its internal product cost initiatives. Moreover, as a result of the U.S. tax reform, Grainger anticipates an effective tax rate of 23-26% for the year 2018.

 

 

The company is focused on improving the end-to-end customer experience by making investments in e-commerce and digital capabilities along with implementing continuous improvement initiatives within its supply chain. Sales from e-commerce accounted for around 51% of total sales in 2017. Sales were primarily buoyed by the launch of Grainger.com and other electronic purchasing platforms in the United States and across all single channel online businesses.

 

 

Grainger generates revenues from the distribution of MRO (Maintenance, Repair and Operating) supplies and products, and related services. In the United States, business investment and exports are two major indicators of MRO spending. Business investment is likely to remain strong in 2018, supported by expanding global markets, lower capital costs and an improving regulatory environment. Further, exports and business non-residential investment are expected to improve. This bodes well for Grainger.

 

 

Grainger is focused on its efforts to strengthen relationships with both large and mid-sized customers. The company has been witnessing increasing volumes across all customer groups lately. Volume and the number of transactions per customer are increasing, and the company is also witnessing increased traffic in all branches. Grainger continues to re-engage lapsed customers and acquire new ones.

 

 

Grainger has gained 106% over the past year, outperforming the industry’s 57% growth. 

 

Grainger currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

 

Some other top-ranked stocks in the same sector include Atkore International Group Inc. (ATKR Quick QuoteATKR - Free Report) , Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) and Flowserve Corporation (FLS Quick QuoteFLS - Free Report) . While Atkore sports a Zacks Rank #1, Caterpillar and Flowserve carry a Zacks Rank #2.

 

Atkore has a long-term earnings growth rate of 10%. The company’s shares have gained 41% in the past year.

 

Caterpillar has a long-term earnings growth rate of 16%. Its shares have appreciated 18% over the past year.

 

Flowserve has a long-term earnings growth rate of 17%. The company’s shares have gained 33% in the past year.

 

 

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