W.W. Grainger, Inc. GWW has been gaining from volume growth in the High Touch Solutions segment and customer growth in the Endless Assortment segment. The High-Touch Solutions segment is gaining from an improved product mix. Repeat customer growth at MonotaRO is aiding the Endless Assortment segment.
Volume improvement and pricing actions are also driving GWW. Grainger’s initiatives to manage inventory effectively, as well as its investments in e-commerce and digital capabilities, will drive profitability in the upcoming quarters.
Let us delve deeper and analyze the factors that make Grainger’s stock worth holding on to at present.
Solid Volume Growth Across Segments: The company’s High-Touch Solutions North America segment has been gaining from continued volume growth across all geographies and strong price realization. The gross margin was driven by an improved product mix. The segment will continue to benefit from pricing actions, and strength in commercial, transportation and heavy manufacturing.
The Endless Assortment segment continues to be aided by customer acquisition across the segment and repeat customer growth at MonotaRO.
Strong High-Touch Solutions Segment: The High-Touch Solutions model serves customers with complex buying needs, primarily in North America. This model helps Grainger create powerful customer-tailored solutions, deliver an improved customer experience and develop deep customer relationships — whether onsite, at a branch, over the phone, or online.
The company creates value for customers through its sales and service representatives, technical product support, fulfillment capabilities, inventory management solutions and other services. The High-Touch Solutions market outgrew the U.S. MRO market in all quarters of 2023 and the first two quarters of 2024.
GWW is witnessing continued growth with large and mid-sized customers in the United States. It focuses on re-engaging lapsed customers and acquiring new ones.
Focus on Growth Strategies: Grainger is focused on improving the end-to-end customer experience by investing in its e-commerce and digital capabilities, and executing improvement initiatives within its supply chain. The company continues to develop online capabilities that promote a personalized, relevant, effortless experience for each customer through Grainger.com, eProcurement connections, 1 solutions and mobile applications.
Grainger has been managing inventory effectively to drive profitability and is focused on making incremental investments in marketing and merchandising.
Near-Term Concerns for GWW Stock
Grainger has lately been witnessing higher SG&A expenses. The increase was caused mainly by a higher headcount to support growth, compensation costs and continued investments in marketing. SG&A costs along with higher operating costs, are likely to affect Grainger's margins in the upcoming quarters.
The company is witnessing product shortages and delays. Its overseas freight remains under pressure due to delays, port congestion, container challenges and increasing fuel prices. These factors are driving costs.
Grainger Stock’s Price Performance
In the past year, Grainger’s shares have gained 28% compared with the industry’s growth of 10.1%.
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GWW’s Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Graham Corporation GHM, Applied Industrial Technologies AIT and Tenaris S.A. TS. GHM sports a Zacks Rank #1 (Strong Buy), and AIT and TS have a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
Graham delivered an average trailing four-quarter earnings surprise of 101.85%. The Zacks Consensus Estimate for GHM’s 2024 earnings is pinned at $1.03 per share, which indicates a year-over-year upsurge of 145.2%. The company’s shares have skyrocketed 127% in a year.
Applied Industrial delivered an average trailing four-quarter earnings surprise of 4.9%. The Zacks Consensus Estimate for AIT’s fiscal 2025 earnings is pinned at $9.77 per share, which indicates year-over-year growth of 0.2%. The company’s shares have gained 46.4% in a year.
The Zacks Consensus Estimate for Tenaris’s 2024 earnings is pegged at $3.29 per share. The company delivered a trailing four-quarter average earnings surprise of 24.5%. TS shares have gained 25.5% in a year.
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W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
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