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

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Shares of W.W. Grainger, Inc. GWW scaled a fresh 52-week high of $374.18 during trading session on Oct 06, before retracting a bit to close at $367.71. Investments in growth initiatives, rising e-commerce sales and focus on strengthening the customer base have contributed to this rally.

The company has a market cap of $19.8 billion. It has an expected long-term earnings per share growth rate of 9.6%.

The stock has appreciated 30.3% over the past year compared with the industry’s growth of 55.7%.

Driving Factors

The company accomplished the goal of remerchandising a record $1.2 billion of products in the United States in 2019 and is on track to complete another $1.6 billion this year. Aided by its investments in growth initiatives, Grainger expanded the U.S maintenance, repair and operating (MRO) market by 150-200 basis points (bps) in 2019. So far this year, the company has consistently outpaced the U.S MRO market.

During the June-end quarter, Grainger outgrew the U.S MRO market by around 100 bps, highlighting the continued traction of its growth initiatives. Grainger will continue its efforts to strengthen relationships with both large- and mid-sized customers to improve sales-force effectiveness. It continues to re-engage lapsed customers and acquire new ones.

The company has witnessed a surge of COVID-19 pandemic-related product sales, such as personal protective equipment (PPE) and safety products on higher customer demand. Grainger expects increased levels of safety and cleaning product sales to large healthcare, government and critical manufacturing customers in the near term. Further, the pandemic has provided a significant boost to Grainger’s e-commerce sales. The company is focused on improving the end-to-end customer experience by making investments in its e-commerce and digital capabilities, and executing improvement initiatives within the supply chain. Furthermore, it has undertaken several cost-control measures in the wake of the uncertainty related to the pandemic.

Grainger’s Canada business is an attractive market and is anticipated to deliver double-digit operating margin growth over the next five years. The company has been focused on reducing its cost structure in the Canada operations to drive growth, and is focused on making incremental investments in marketing and merchandising. It expects to return to growth in the business in the remaining half of 2020, and anticipates the business to be sustainable and profitable.

Solid Estimate Revisions

The company’s earnings estimate for the current year is pegged at $15.84 per share, having moved 0.7% north over the past 30 days.

Zacks Rank & Stocks to Consider

Grainger currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Titan International, Inc. TWI, Berry Global Group, Inc. BERY and Fortune Brands Home & Security, Inc. FBHS, each carrying a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Titan International has an estimated earnings growth rate of 21.1% for 2020. The company’s shares have gained 10.3% in a year’s time.

Berry has a projected earnings growth rate of 32.3% for fiscal 2020. Shares of the company have appreciated 21.8% over the past year.

Fortune Brands has an expected earnings growth rate of 6.9% for the current year. The stock has surged 55.6% in the past year.

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