WW Grainger (GWW) AI Stock Analysis

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WW Grainger

(NYSE:GWW)

71Outperform

WW Grainger demonstrates strong financial performance with robust profitability and solid cash management, which are significant strengths. However, technical indicators show bearish momentum, and valuation metrics suggest moderate overvaluation. The recent earnings call indicates strategic growth initiatives and shareholder returns, but also highlights challenges such as sluggish demand and potential tariff risks.

Positive Factors

Growth Expectations

GWW stands out as having a more achievable bar on 2025 consensus organic growth.

Market Position

As the largest US Industrial distributor, GWW has a strong pulse on market trends and tariffs into 2025.

Negative Factors

Financial Guidance

There are concerns about the FY25 guidance framework, which embeds no impact for tariffs, likely pinching margins to the low-end of the guide.

Tariffs Impact

Private label products, accounting for about 20% of sales, tend to have overweight import exposure and are likely less competitive in a tariff regime.

Valuation Concerns

Valuation has fallen to a more comfortable position vs. peers, but remains extended at approximately 24x NTM P/E vs. a 20x 5Y median, indicating potential downside risk.

WW Grainger (GWW) vs. S&P 500 (SPY)

Market Cap

$46.50B

Dividend Yield0.89%

Average Volume (3M)286.19K

Price to Earnings (P/E)24.8

Beta (1Y)0.85

Revenue Growth4.19%

EPS Growth6.60%

CountryUS

Employees23,500

SectorIndustrials

Sector Strength61

IndustryIndustrial - Distribution

Share Statistics

EPS (TTM)38.92

Shares Outstanding48,171,430

10 Day Avg. Volume282,684

30 Day Avg. Volume286,185

Financial Highlights & Ratios

PEG Ratio3.75

Price to Book (P/B)N/A

Price to Sales (P/S)2.73

Price to Cash Flow (P/CF)27.40

P/FCF Ratio24.80

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$1,088.14

Price Target Upside12.72% Upside

Rating ConsensusHold

Number of Analyst Covering10

WW Grainger Business Overview & Revenue Model

Company DescriptionW.W. Grainger, Inc. distributes maintenance, repair, and operating (MRO) products and services in the United States, Japan, Canada, the United Kingdom, and internationally. The company operates through two segments, High-Touch Solutions N.A. and Endless Assortment. It offers safety and security supplies, material handling and storage equipment, pumps and plumbing equipment, cleaning and maintenance supplies, and metalworking and hand tools. It also offers inventory management and technical support services. The company serves businesses, corporations, government entities, and other institutions through sales and service representatives, and electronic and ecommerce channels. W.W. Grainger, Inc. was founded in 1927 and is headquartered in Lake Forest, Illinois.

How the Company Makes MoneyW.W. Grainger makes money primarily through the sale of MRO products to businesses and institutions. The company generates revenue through its comprehensive catalog of products, which are sold via its e-commerce platform, direct sales force, and physical branches. Key revenue streams include the sale of safety and security equipment, material handling products, and electrical supplies. Grainger's earnings are bolstered by its ability to offer a broad product selection, competitive pricing, and reliable delivery options. Additionally, the company's strong supplier relationships and efficient supply chain management contribute significantly to its financial performance. Strategic partnerships and acquisitions also play a role in expanding its market reach and enhancing its service offerings.

WW Grainger Financial Statement Overview

Summary

WW Grainger's financial performance is strong, with consistent revenue and profit growth, efficient operations, and solid financial management. The company exhibits healthy profitability and maintains robust cash generation capabilities. While free cash flow growth is slightly negative, the overall financial health is resilient, making GWW a stable entity in the industrial equipment distribution sector.

Income Statement

Very Positive

WW Grainger has demonstrated solid revenue growth with a TTM increase of 4.18% compared to the previous year, reflecting a positive growth trajectory. Gross profit margin remains healthy at 39.37%, indicating strong cost management. The net profit margin is robust at 11.12%, underscoring profitability. EBIT and EBITDA margins are also strong at 15.36% and 16.49% respectively, highlighting efficient operations.

Balance Sheet

Positive

The company maintains a solid equity position with an equity ratio of 100%, indicating no leverage risk from debt on equity. The debt-to-equity ratio is low, reflecting prudent financial management. Return on equity stands at 21.63%, demonstrating effective use of equity to generate profits. Overall, the balance sheet is strong, with good liquidity and financial stability.

Cash Flow

Positive

Operating cash flow exceeds net income, resulting in a favorable operating cash flow to net income ratio of 1.11, indicating strong cash generation. The free cash flow has shown minor fluctuations but remains positive, reflecting good cash management. Free cash flow growth rate is slightly negative, but the company maintains a stable free cash flow to net income ratio of 0.82, showcasing resilience in cash flow operations.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
17.17B	16.48B	15.23B	13.02B	11.80B
	Gross Profit
6.76B	6.50B	5.85B	4.72B	4.24B
	EBIT
2.64B	2.56B	2.21B	1.55B	1.02B
	EBITDA
2.89B	2.81B	2.40B	1.74B	1.22B
	Net Income Common Stockholders
1.91B	1.83B	1.55B	1.04B	695.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.04B	660.00M	325.00M	241.00M	585.00M
	Total Assets
8.83B	8.15B	7.59B	6.59B	6.29B
	Total Debt
3.18B	2.75B	2.71B	2.76B	2.40B
	Net Debt
2.15B	2.09B	2.38B	2.52B	1.81B
	Total Liabilities
5.13B	4.71B	4.85B	4.43B	4.20B
	Stockholders Equity
3.70B	3.12B	2.73B	2.16B	2.09B
Cash Flow		Free Cash Flow
1.57B	1.59B	1.08B	682.00M	926.00M
	Operating Cash Flow
2.11B	2.03B	1.33B	937.00M	1.12B
	Investing Cash Flow
-520.00M	-422.00M	-263.00M	-226.00M	-179.00M
	Financing Cash Flow
-1.18B	-1.28B	-972.00M	-1.04B	-726.00M

WW Grainger Technical Analysis

Technical Analysis Sentiment

Negative

Last Price965.37

Price Trends

50DMA

1003.51

Negative

100DMA

1066.37

Negative

200DMA

1034.04

Negative

Market Momentum

MACD

-8.64

Negative

RSI

49.50

Neutral

STOCH

62.33

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GWW, the sentiment is Negative. The current price of 965.37 is below the 20-day moving average (MA) of 972.40, below the 50-day MA of 1003.51, and below the 200-day MA of 1034.04, indicating a bearish trend. The MACD of -8.64 indicates Negative momentum. The RSI at 49.50 is Neutral, neither overbought nor oversold. The STOCH value of 62.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GWW.

WW Grainger Risk Analysis

WW Grainger disclosed 24 risk factors in its most recent earnings report. WW Grainger reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

WW Grainger Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FAST	78 Outperform	$43.85B	38.17	33.04%	2.25%	2.71%	-0.63%
AIT	74 Outperform	$7.99B	21.08	22.70%	0.76%	0.37%	3.52%
GWW	71 Outperform	$46.50B	24.78	58.98%	0.89%	4.19%	6.60%
WCC	70 Outperform	$6.69B	10.51	14.34%	1.23%	-2.53%	-4.03%
MSM	68 Neutral	$3.91B	18.47	15.53%	4.79%	-5.71%	-31.93%
Sector *	62 Neutral	$7.67B	13.25	3.04%	3.47%	3.63%	-13.99%

* Industrials Sector Average

Performance Comparison

GWW

WW Grainger

965.37

6.75

0.70%

AIT

Applied Industrial Technologies

231.97

40.56

21.19%

FAST

Fastenal Company

76.47

8.14

11.91%

MSM

MSC Industrial

75.18

-13.80

-15.51%

WCC

Wesco International

153.86

-10.00

-6.10%

GB:FERG

Ferguson PLC

11,740.00

-5,388.70

-31.46%

WW Grainger Earnings Call Summary

Earnings Call Date: Jan 31, 2025 | % Change Since: -14.10% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a balanced sentiment with notable successes in financial performance, particularly in the Endless Assortment segment and technology investments. However, challenges such as a sluggish demand environment and potential tariff uncertainties present risks. The company shows resilience and confidence in its strategic direction despite these challenges.

Highlights

Strong Full Year 2024 Performance

Grainger achieved over $17.2 billion in sales, marking a 4.2% increase on a reported basis and a 4.7% increase on a daily organic constant currency basis. Adjusted EPS grew by over 6% to $38.96 per share, with an ROIC of 41.6%.

Endless Assortment Segment Success

The segment showed significant improvement with daily constant currency sales up 11.6%. MonotaRO achieved 29% growth with enterprise customers, and Zoro returned to double-digit sales growth by the end of the year.

High-Touch Solutions Market Outgrowth

The High-Touch Solutions U.S. business outgrew the market by approximately 100 basis points, driven by 325 basis points of volume outgrowth for the year.

Investment in Technology and Data

Grainger continues to leverage technology and data, including machine learning and AI, to improve customer service and operational efficiency, notably in inventory management and customer interaction.

Lowlights

Sluggish Demand Environment in 2024

The demand environment throughout 2024 was sluggish, affecting growth rates, particularly in the back half of December due to holiday timing and customer shutdowns.

Challenges in Achieving Volume Growth Targets

Grainger's volume growth in 2024 was below the lower end of their 400 to 500 basis points target, with expectations to remain at the low end of this range for 2025.

Potential Tariff Uncertainties

Grainger did not include potential tariff impacts in their 2025 guidance due to uncertainty, which could pose a risk to cost management.

Company Guidance

During the W.W. Grainger Fourth Quarter 2024 Earnings Conference Call, the company reported robust financial performance and outlined its strategic guidance for 2025. Grainger achieved $17.2 billion in sales for 2024, reflecting a 4.2% increase on a reported basis, with a 15.5% operating margin and adjusted EPS of $38.96, up over 6% from the previous year. The company's ROIC stood at 41.6%, and operating cash flows exceeded $2.1 billion. Looking ahead to 2025, Grainger projects total company revenue to range between $17.6 billion and $18.1 billion, with an operating margin of 15.1% to 15.5%. The guidance includes 4% to 6.5% growth in daily constant currency sales, with the High-Touch Solutions segment expected to grow between 2.5% and 4.5%, and Endless Assortment sales projected to rise between 11% and 15%. Additionally, Grainger plans capital expenditures of $450 million to $550 million, with a continued focus on investing in supply chain capacity and technology advancements to maintain industry-leading service levels. The company also aims to return $1.6 billion to shareholders through dividends and share repurchases, reflecting its commitment to creating sustainable value for stakeholders.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.