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Grainger Scales New 52-Week High: What's Driving the Stock?

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Shares of W.W. Grainger, Inc. GWW scaled a fresh 52-week high of $339.81 during trading session on Dec 26, before retracting a bit to close at $338.91. Upbeat current-year outlook, momentum in the United States and a solid Canadian business contributed to this rally.

The company has a market cap of $18.17 billion. Over the last three months, its average volume of shares traded has been 328.5M. The company has an expected long-term earnings per share growth rate of 11.3%.

The company outpaced the Zacks Consensus Estimate in two of the trailing four quarters, the average positive earnings surprise being 1.94%.

Notably, the stock has rallied 26.3% over the past six months, outperforming the industry’s gain of 5.4%.

Driving Factors

Grainger expects current-year earnings per share in the band of $17.10-$18.70, reflecting year-over-year growth of 2-12%. The company’s solid operating performance and favorable tax rates will fuel bottom-line growth. In the United States, business investment is likely to remain strong, supported by expanding global markets, lower capital costs and an improving regulatory environment.

Grainger is well positioned to benefit from its efforts to strengthen relationships with customers. Moreover, the company is poised to deliver its strongest SG&A leverage and continued operating-margin improvement, aided by an incremental margin of 20-25%.

The company is also focused on improving end-to-end customer experience by making investments in e-commerce and digital capabilities, and implementing improvement initiatives within the supply chain. Notably, it intends to keep reducing the cost base. Further, the company expects to drive growth with the endless assortment model on MonotaRO and incremental investments in its Zoro businesses.

Grainger’s Canada business is an attractive market, anticipated to deliver double-digit operating margin growth over the long haul. The company has been focused on reducing its cost structure in the Canada operations, in a bid to bolster growth. Grainger has been managing inventory efficiently to boost profitability, and is focused on making incremental investments in marketing and merchandising.

Positive Growth Projections

The Zacks Consensus Estimate for Grainger’s current-year earnings per share currently stands at $17.46, indicating 4.5% growth from the year-ago quarter. The same for 2020 is pegged at $18.89, suggesting an increase of 8.20% from the year-earlier reported tally.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Northwest Pipe Company NWPX, Tennant Company TNC and Reliance Steel & Aluminum Co. RS. While Northwest Pipe and Tennant sport a Zacks Rank #1 (Strong Buy), Reliance Steel & Aluminum carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Northwest Pipe has an expected earnings growth rate of 15.8% for the current year. The stock has appreciated 43.8% over the past year.

Tennant has a projected earnings growth rate of 29.8% for 2019. The company’s shares have rallied 44.2% over the past year.

Reliance Steel & Aluminum has an estimated earnings growth rate of 7.4% for the ongoing year. In a year’s time, the company’s shares have gained 60.8%.

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