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W.W. Grainger (GWW)
NYSE:GWW
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WW Grainger
(NYSE:GWW)
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Rating:77Outperform
Price Target:
$1,244.00
▲(7.96% Upside)
Action:ReiteratedDate:02/03/26
The score is driven primarily by strong underlying financial quality (profitability, improving leverage) and positive technical momentum (price above key moving averages, positive MACD). It is tempered by a higher valuation (P/E ~30, low yield) and near-term profitability/cash-conversion pressures, though management’s 2026 guidance supports a constructive outlook despite tariff/LIFO, cost, and demand risks.
Positive Factors
Endless Assortment strong growth and margin expansion
Sustained double-digit growth and meaningful margin improvement in Endless Assortment reflect scalable e‑commerce and assortment advantages. This durable secular shift toward larger online catalogs can drive structural revenue mix gains, higher customer retention, and long-term margin expansion as fixed costs spread over higher volume.
Improved leverage and solid balance-sheet positioning
Declining leverage provides financial flexibility to absorb shocks, fund distribution center expansion, and support buybacks/dividends. A stronger balance sheet reduces refinancing risk and underpins the company’s ability to execute strategic investments and weather cyclical MRO demand over the medium term.
Consistent operating cash flow and shareholder returns
Reliable operating cash generation enables sustainable capital allocation: reinvestment in logistics and digital, steady dividends, and repurchases. Over time this supports competitive reinvestment and returns, reinforcing customer service capabilities and shareholder value even if margins face cyclical pressure.
Negative Factors
Tariff-driven cost and LIFO headwinds
Persistent tariff uncertainty and LIFO accounting effects can structurally compress margins and create uneven margin recovery. If tariff costs persist or widen, Grainger may face sustained input-cost passthrough limits, increasing price volatility and pressuring long-run operating profitability.
Weaker free-cash-flow conversion
A decline in cash conversion suggests rising working-capital needs or timing issues, reducing available cash for reinvestment or returns. Over several quarters this can limit flexibility to fund growth initiatives, capital projects, or maintain buyback/dividend pacing without increasing leverage.
High-Touch outgrowth below long-term target; segment mix headwind
High-Touch underperformance versus targets and faster Endless Assortment growth create a structural mix shift toward lower-margin channels. If High-Touch share gains stall, the company may face sustained margin pressure and slower-than-expected outgrowth, limiting long-term operating-margin upside.
WW Grainger (GWW) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$54.59B
Dividend Yield0.86%
Average Volume (3M)307.22K
Price to Earnings (P/E)32.2
Beta (1Y)0.77
Revenue Growth4.83%
EPS Growth-3.60%
CountryUS
Employees23,500
SectorIndustrials
Sector Strength72
IndustryIndustrial - Distribution
Share Statistics
EPS (TTM)9.44
Shares Outstanding47,373,024
10 Day Avg. Volume248,160
30 Day Avg. Volume307,219
Financial Highlights & Ratios
PEG Ratio-3.10
Price to Book (P/B)11.67
Price to Sales (P/S)2.69
P/FCF Ratio36.31
Enterprise Value/Market Cap1.05
Enterprise Value/Revenue3.20
Enterprise Value/Gross Profit8.18
Enterprise Value/Ebitda20.75
Forecast
1Y Price Target
$1,150.88Price Target Upside-0.12% Downside
Rating ConsensusHold
Number of Analyst Covering10
EPS Forecast (FY)43.58
Revenue Forecast (FY)$18.93B
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 MoneyGrainger generates revenue primarily through the sale of its extensive catalog of industrial and maintenance products to businesses and institutions. The company operates on a transactional revenue model, where customers purchase products directly either through its online platform or physical branches. Key revenue streams include sales to commercial customers, government contracts, and supplies for various industries. Grainger also benefits from long-term relationships with suppliers, which often leads to favorable pricing and exclusive product offerings. Additionally, the company leverages technology to enhance customer experience and operational efficiency, contributing to its growth and profitability.
WW Grainger Key Performance Indicators (KPIs)
Any
Revenue by Segment
Breaks down sales across various business segments, revealing which areas contribute most to overall revenue and indicating potential areas for expansion or risk.
Breaks down sales across various business segments, revealing which areas contribute most to overall revenue and indicating potential areas for expansion or risk.
Data provided by:
The Fly
The FlyWW Grainger Earnings Call Summary
Earnings Call Date:Feb 03, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 07, 2026
Earnings Call Sentiment Positive
The call highlighted meaningful progress across strategic initiatives (assortment expansion, digital and AI capabilities, seller coverage, strong endless-assortment performance, cash generation and shareholder returns) and provided a constructive 2026 outlook with margin and EPS expansion. However, the business continues to navigate tangible near-term headwinds — tariff-driven cost and LIFO impacts, higher SG&A (notably healthcare), mixed market demand, and tax headwinds — and High-Touch outgrowth remains below long-term targets. On balance, management portrays confidence in execution and a path to improved margins and growth in 2026 while acknowledging risks and a cautious market view.Q4-2025 Updates
Positive Updates
Full-Year Revenue and Organic Growth
Total company sales for 2025 were $79.9 billion, with reported sales growth of 4.5% and daily organic constant currency growth of 4.9% for the year.
Endless Assortment Strong Performance
Endless Assortment delivered outsized growth: daily organic constant currency sales up ~15.6% for the year; Zoro U.S. up 16% and MonotaRO up 18.4% (local days/local currency). Segment operating margin improved 200 basis points to 10.6%.
MonotaRO Momentum
MonotaRO grew enterprise customers 25%, expanded same-day shipping regions, and is building a new DC (Mito) that will nearly double shipping capacity in Japan.
High-Touch Outgrowth vs Market
Grainger estimates ~250 basis points of volume outgrowth for High-Touch Solutions in 2025 (High-Touch volume +1.4% vs multifactor MRO model down -1.5% to -0.5%), demonstrating share gain despite a weak market.
Margins, EPS, Cash Generation and Returns
Full-year operating margin was 15.0%; adjusted EPS was $39.48 (up 1.3%); ROIC 39.1%; operating cash flow $2.0 billion; $1.5 billion returned to shareholders via dividends and buybacks in 2025.
Product Assortment and Merchandising
Net assortment growth of over 85,000 SKUs in 2025 (largest net SKU growth for the high-touch segment in nearly a decade), with expanded private-label and factory automation offerings.
Sales Force Expansion & Seller Tools
Added ~110 new sellers in 2025 (over 300 since 2022), >10% increase in U.S.-based sales team; widespread adoption of SellerInsights and plans to leverage AI to improve seller effectiveness.
2026 Guidance and Confidence
2026 outlook: revenue $18.7B–$19.1B with daily organic constant currency growth 6.5%–9%; total company operating margin guide 15.4%–15.9% (up 40–90 bps vs 2025); EPS $42.25–$44.75 (midpoint >10% growth); operating cash flow $2.1B–$2.3B; share repurchases ~ $1B.
Negative Updates
Tariff and LIFO Headwinds
Tariff-related cost inflation caused LIFO inventory valuation headwinds in 2025; price-cost on a LIFO basis remained negative though improved in Q4. Management notes the tariff situation remains fluid despite passing the majority of known costs.
Q4 Margin and Expense Pressure
Q4 total company gross margin was 39.5% (down ~10 bps YoY) and operating margin declined ~70 bps YoY due to higher SG&A; High-Touch operating margin declined 120 bps YoY in the quarter driven by payroll, higher-than-expected healthcare costs, and softer High-Touch top line.
Q4 EPS Decline
Q4 diluted EPS was $9.44, down 2.8% versus 2024 (though above midpoint of implied guide).
Market Demand Weakness and Conservatism
Grainger is conservatively modeling the MRO market to be down -1.5% to flat in 2026; management cites muted MRO market demand, government shutdown impacts, and uneven industry-specific trends.
Outgrowth Below Long-Term Target
While outgrowth (~250 bps) shows share gain, it remains short of Grainger’s long-term target of 400–500 basis points of average annual outgrowth.
Segment Mix Headwind
Faster growth in Endless Assortment vs High-Touch creates a segment-mix headwind to company margins; private-label competitiveness also pressured by tariff dynamics on certain SKUs.
Near-Term Gross Margin Seasonality Disruption
Q1 2026 gross margins expected to decline sequentially due to lingering LIFO effects and the Grainger sales meeting accounting treatment (supplier rebates flowing to SG&A), deviating from normal seasonal recovery.
Higher Tax Rate in 2026
Expected effective tax rate for 2026 is roughly 25%, about 130 basis points unfavorable versus prior-year adjusted rate due to federal tax law changes and lack of one-time tax planning benefits.
Company Guidance
Grainger guided 2026 revenue of $18.7–$19.1B (daily organic constant currency sales +6.5% to +9%; reported +4.2% to +6.7%), with total company operating margin of 15.4%–15.9% (up 40–90 bps) and EPS of $42.25–$44.75 (midpoint >10% growth). By segment, High Touch Solutions is expected to grow daily constant currency sales +5.0% to +7.5% (market assumed down 1.5% to flat) with HTS operating margin 16.9%–17.4% (≈+35 bps), and Endless Assortment daily organic constant currency sales +12.5% to +15.0% (Zoro and MonotaRO each expected to grow in the low teens locally) with EA operating margin 10.0%–10.5% (+20–70 bps); segment growth is ~230 bps lower on a reported basis after FX and the Zoro UK exit. Key assumptions include price contribution north of 3% (≈2.5–3% carryover from 2025 actions), LIFO headwinds that subside in H2, a ~45 bp margin tailwind from the U.K. exit, an effective tax rate of about 25% (≈130 bps unfavorable), operating cash flow ~$2.1–$2.3B (≈100% conversion), CapEx $550–$650M, ~$1B of share repurchases, and a dividend to be set in Q2 with an expected high-single to low-double-digit increase. For Q1, Grainger expects sales of roughly $4.5–$4.6B (up north of 7.5% daily organic constant currency; January prelim +10%+), Q1 gross margin to decline sequentially, and Q1 operating margin to be just north of 15%.WW Grainger Financial Statement Overview
Summary
Strong and consistent profitability for a distributor and steady multi-year revenue growth, with improving leverage (debt-to-equity down to ~0.76 TTM). Offsetting this, TTM margins and net income are down versus 2024 and free-cash-flow conversion weakened to ~60% of net income, indicating some recent earnings/cash efficiency pressure.Income Statement
Revenue has expanded steadily from 2020 to 2024, and TTM (Trailing-Twelve-Months) revenue is also higher, indicating continued top-line momentum. Profitability is strong for a distributor, with gross margin consistently near ~39% and solid operating profitability; however, TTM (Trailing-Twelve-Months) margins and net income are down versus 2024 (net margin ~9.7% vs ~11.1%), signaling some recent pressure on earnings power despite higher sales.86
Very Positive
Balance Sheet
Leverage looks reasonable and has improved, with debt-to-equity declining from elevated levels in 2020–2022 to ~0.76 in TTM (Trailing-Twelve-Months), supported by a meaningful equity base and growing assets. Returns on equity are very high across the period, reflecting strong profitability, though such elevated ROE can also indicate that the company is operating with a relatively leveraged or optimized capital structure, leaving less cushion if profitability softens.78
Positive
Cash Flow
Cash generation is healthy with operating cash flow consistently positive and free cash flow strong in absolute dollars; TTM (Trailing-Twelve-Months) free cash flow is up sharply versus the prior year. That said, cash conversion has weakened recently: TTM (Trailing-Twelve-Months) free cash flow is only about 60% of net income (down from ~74–81% in 2022–2024), suggesting higher working-capital needs or timing headwinds, even as operating cash flow remains roughly in line with net income.74
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 17.94B | 17.17B | 16.48B | 15.23B | 13.02B |
| Gross Profit | 7.01B | 6.69B | 6.50B | 5.85B | 4.72B |
| EBITDA | 2.77B | 2.90B | 2.81B | 2.40B | 1.74B |
| Net Income | 1.71B | 1.91B | 1.83B | 1.55B | 1.04B |
Balance Sheet | |||||
| Total Assets | 8.96B | 8.83B | 8.15B | 7.59B | 6.59B |
| Cash, Cash Equivalents and Short-Term Investments | 585.00M | 1.04B | 660.00M | 325.00M | 241.00M |
| Total Debt | 3.16B | 3.18B | 2.75B | 2.71B | 2.76B |
| Total Liabilities | 4.82B | 5.13B | 4.71B | 4.85B | 4.43B |
| Stockholders Equity | 4.14B | 3.36B | 3.12B | 2.44B | 1.87B |
Cash Flow | |||||
| Free Cash Flow | 1.33B | 1.57B | 1.59B | 1.08B | 682.00M |
| Operating Cash Flow | 2.02B | 2.11B | 2.03B | 1.33B | 937.00M |
| Investing Cash Flow | -645.00M | -520.00M | -422.00M | -263.00M | -226.00M |
| Financing Cash Flow | -1.82B | -1.18B | -1.28B | -972.00M | -1.04B |
WW Grainger Technical Analysis
Positive
1152.25
Price Trends
1080.74
Positive
1019.18
Positive
1018.15
Positive
Market Momentum
13.72
Positive
58.90
Neutral
67.73
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GWW, the sentiment is Positive. The current price of 1152.25 is above the 20-day moving average (MA) of 1146.44, above the 50-day MA of 1080.74, and above the 200-day MA of 1018.15, indicating a bullish trend. The MACD of 13.72 indicates Positive momentum. The RSI at 58.90 is Neutral, neither overbought nor oversold. The STOCH value of 67.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $54.59B | 32.21 | 48.10% | 0.86% | 4.83% | -3.60% | |
77 Outperform | $16.69B | 34.07 | 17.00% | 3.38% | -0.71% | -0.17% | |
76 Outperform | £50.02B | 27.12 | 32.90% | 1.35% | 4.92% | 18.72% | |
75 Outperform | $53.20B | 42.09 | 33.30% | 2.10% | 6.92% | 5.98% | |
66 Neutral | $5.25B | 25.64 | 14.84% | 3.96% | -1.35% | -22.24% | |
66 Neutral | $14.40B | 22.19 | 12.91% | 0.72% | 5.28% | 1.97% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.