Here's Why You Should Hold Grainger (GWW) Stock Right Now

Zacks Investment Research | Dec 07, 2018 07:40AM ET

W.W. Grainger, Inc. (NYSE:GWW) is likely to gain from growth in e-commerce sales, digital capabilities and solid business investment in United States despite the impact of tariffs and foreign exchange headwinds.

The company also outpaced the Zacks Consensus Estimate in the trailing four quarters. This resulted in average positive earnings surprise of 19.72%. The company has an estimated long-term earnings growth rate of 12.40%.

Below, we briefly analyze the company's potential growth drivers and possible headwinds.

Factors Favoring Grainger

Strong Q3 Upbeat Outlook: Grainger’s third-quarter 2018 adjusted earnings per share of $4.19 improved 44% year over year and beat the Zacks Consensus Estimate of $3.96.

Grainger’s 2018 earnings per share guidance is pegged at $15.05-$16.05, reflecting year-over-year growth of 36% at the mid-point. The company anticipates earnings at the higher end of the guidance. The bottom line will also gain from the lower tax rate. As a result of the U.S. tax reform and the tax benefit from stock-based compensation, Grainger anticipates an adjusted tax rate of 23% to 26% for the year. It also projects reporting a positive operating margin run rate in 2018.

Positive Estimate Revisions, Growth Projections: The Zacks Consensus for fiscal 2018 and 2019 has gone up 2% and 1%, respectively, over the past 90 days. The Zacks Consensus Estimate for earnings is currently pegged at $16.30 for fiscal 2018, reflecting year-over-year growth of 42%. For fiscal 2019, the Zacks Consensus Estimate for earnings is pegged at $17.92, highlighting year-over-year growth of 10%.

Price Performance: The stock has gained around 35% over the past year, against the Zacks Investment Research

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Written By: Zacks Investment Research

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