W.W. Grainger, Inc. GWW continues to benefit from a turnaround in the Canadian business, investments in digital capabilities and focus on strengthening its customer base. Further, the company’s long-term earnings growth rate of 12.4% makes us confident of its inherent strength.
Let’s delve deeper into the factors that make this stock an attractive investment option.
Upbeat 2018 Guidance
Grainger reaffirmed its 2018 earnings per share guidance of $15.05-$16.05, which reflects year-over-year growth of 36% at the mid-point. The company expects to report earnings at the higher end of the guidance. Earnings will benefit from the lower tax rate. As a result of the U.S. tax reform and the tax benefit from stock-based compensation, Grainger expects an adjusted tax rate of 23-26% for the year.
Other Driving Factors
In its Canada business, the execution of Grainger’s turnaround continues to make progress. The company is focused on improving gross margin and reducing its cost structure in the Canada operations. It expects to record a profitable run rate in 2018 for the business.
Notably, Grainger will continue its efforts to strengthen relationships with both large- and mid-sized customers. The company has been witnessing increasing volumes across all customer groups, lately. Grainger also continues to re-engage lapsed customers and acquire new ones.
Of late, Grainger’s e-commerce sales have gained primarily backed by the launch of Grainger.com and other electronic purchasing platforms in the United States. Grainger is focused on improving end-to-end customer experience by making investments in its e-commerce and digital capabilities, and executing continued improvement initiatives within the company’s supply chain.
Solid Zacks Rank, Score Combination
Grainger carries a Zacks Rank #2 (Buy), at present. It has a VGM score of A. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1(Strong Buy) or 2, make solid investment choices.
Price Performance
Grainger’s shares have outperformed the industry over the past year. The stock has depreciated around 13%, while the industry recorded a loss of around 4%.
Northbound Estimate Revisions
Grainger has been witnessing upward estimate revisions over the last 90 days. The Zacks Consensus Estimate for earnings moved up 1.6% to $16.30 for 2018 and 0.3% to $17.90 for 2019. A positive trend in estimate revisions reflects optimism in the company’s prospects.
Other Stocks to Consider
Some other top-ranked stocks in the same sector are DMC Global Inc. BOOM, CECO Environmental Corp. CECE and Northwest Pipe Company NWPX. All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
DMC Global has a long-term earnings growth rate of 20%. The stock has gained around 38% in a year’s time.
CECO has a long-term earnings growth rate of 15%. Its shares have surged 31% in the past year.
Northwest Pipe has a long-term earnings growth rate of 10%. The company’s shares have been up 14% during the past year.
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