W.W. Grainger, Inc. GWW is poised to gain from solid recovery in solid e-commerce sales, demand for non-pandemic products volume and strong momentum in the High-Touch Solutions and Endless Assortment segments. Efforts to strengthen customer relationships and investments in growth initiatives will continue to support the top line. Benefits from price realization and cost-reduction actions will boost margins.
Recovery in Non-Pandemic Product Volumes Bodes Well
In the High Touch Solutions North America (N.A) segment, Grainger is witnessing revenue growth in nearly all the end markets, driven by a strong recovery in core, non-pandemic product volume. Pandemic product sales also remained elevated throughout 2021. The Endless Assortment segment delivered year-over-year top-line growth of 14.9% in the third quarter, courtesy of strong customer acquisition in the Zoro U.S. business. This momentum is likely to have continued in the fourth quarter as well.
Grainger projects 2021 net sales between $12.7 billion and $13 billion. In 2020, the company had reported sales of $11.8 billion. The company expects total daily sales growth between 11.5% and 12.5%. It anticipates earnings per share in the band of $19.00-$20.50 for 2021, calling for year-over-year growth of 17.5-26.5%.
Grainger is investing in the non-pandemic product inventory and partnering with suppliers to mitigate the supply-related challenges, inbound lead-time challenges and any possible cost increases. Non-pandemic sales growth is expected to have positively impacted fourth-quarter results. Benefits from price realization and focus on cost reductions are likely to have driven margins in the quarter. The company has been focused on reducing its cost structure in the Canada operations to drive profitable growth.
Strong Customer Relationships, E-Commerce to Fuel Growth
Grainger continues to outpace the U.S. maintenance, repair and operating (MRO) market, supported by the continued traction of its growth initiatives. The company intends to generate 300-400 basis points of outgrowth compared with the market by building advantaged MRO solutions, delivering unparalleled customer service and offering differentiated sales and services. It will continue its efforts to strengthen relationships with large- and mid-sized customers to improve the sales-force effectiveness.
Grainger is focused on improving the end-to-end customer experience by making investments in its e-commerce and digital capabilities as well as executing improvement initiatives within the supply chain. The pandemic provided a significant boost to its e-retail sales.
Grainger’s current-year earnings estimate is pegged at $23.55, suggesting year-over-year growth of 20.1%.
Grainger’s shares have gained 31.7% in the past year against the industry’s decline of 36.7%.
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Zacks Rank & Other Stocks to Consider
Grainger currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the Industrial Products sector are Berry Global Group, Inc. BERY, AGCO Corporation AGCO and Sealed Air Corporation SEE. While BERY flaunts a Zacks Rank #1 (Strong Buy), AGCO and SEE carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Berry Global Group has an estimated earnings growth rate of around 2.8% for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for fiscal 2022 earnings has been revised 18% upward.
In a year, the stock has increased 30.5%. Berry Global Group has a trailing four-quarter earnings surprise of 16.5%, on average.
AGCO Corporation has an expected earnings growth rate of 16.3% for 2022. The Zacks Consensus Estimate for current-year earnings has moved 1% north in the past 60 days.
AGCO Corporation’s shares have gained 9.8% in the past year. AGCO has a trailing four-quarter earnings surprise of 47.5%, on average.
Sealed Air has a projected earnings growth rate of 16.2% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved 0.7% north over the past 60 days.
SEE’s shares have gained 23.8% in a year. Sealed Air has a trailing four-quarter earnings surprise of 6.5%, on average.
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