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Grainger (GWW) Up 22% in 3 Months: What's Behind the Rally?

Shares of W.W. Grainger, Inc.GWW have gained around 22% over the last three months. The company has also outperformed its industry 's growth of roughly 9%.

Grainger has a market cap of roughly $15.7 billion and average volume of shares traded in the last three months is around 1.01 million. The company has expected long-term earnings per share growth of 9.7%.

Let's take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.

Driving Factors

Forecast-topping earnings performance in the last reported quarter and upbeat outlook for 2018 have contributed to Grainger' rally.

The company's fourth-quarter 2017 adjusted earnings per share of $2.94 came in higher than the prior-year figure of $2.45 by 20%. Further, earnings beat the Zacks Consensus Estimate of $2.18 by a wide margin of 35%. The company witnessed strong volumes in its U.S. business, driven by strategic pricing initiatives as well as an improving demand environment. Grainger reported revenues of $2,632 million, up 6.5% from the prior-year quarter figure of $2,471 million, driven by an increase of 11 percentage point (pp) from volume growth. The figure also surpassed the Zacks Consensus Estimate of $2,568 million.

Grainger raised fiscal 2018 earnings per share guidance range to $12.95-$14.15 from the previous range of $10.60-$11.80. The increase in the guidance factors in a 50 cents contribution from the better-than-expected fiscal 2017 operating performance, benefit from lower corporate tax rate under U.S. tax legislation and incremental share buybacks funded by the benefits of the tax legislation.

The company anticipates higher sales and earnings as well as a higher operating margin in fiscal 2018. The mid-point of the EPS guidance reflects an 18% growth compared with the prior year. The company maintains sales growth guidance in the range of 3-7% for the fiscal.

Grainger's pricing initiatives have been driving growth. The company will continue its pricing strategies in the United States through the fiscal. It expects solid volume growth due to these actions and an improved demand environment.

W.W. Grainger, Inc. Price and Consensus

W.W. Grainger, Inc. price-consensus-chart | W.W. Grainger, Inc. Quote

The company is taking steps to bring the Canada business back to profitability. It announced a plan to take $150-$210 million of cost out of the Canada business in fiscal 2017 and continues to make strong progress on that plan. The company remains focused on improving services to customers and consistent direct-to-customer shipping. Further, it is focusing on Canada's cost structure through branch reductions and creation of North American centers of excellence.

Other Stocks to Consider

Other top-ranked companies in the industrial products space include Mobile Mini, Inc. MINI , Milacron Holdings Corp. MCRN and Rexnord Corporation RXN , all sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Mobile Mini has an expected long-term earnings growth rate of 14%. Its shares have rallied roughly 34% over the past three months.

Milacron Holdings has an expected long-term earnings growth rate of 5.4%. Its shares have gained 17% over the past three months.

Rexnord Corporation has an expected long-term earnings growth rate of 12.4%. Its shares have rallied around 22% over the past three months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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