Stock (Symbol) |
Grainger (GWW) |
Stock Price |
$198 |
Sector |
| Retail & Travel |
Data is as of |
| February 2, 2016 |
Expected to Report |
| Apr 18 |
Company Description |
 W.W. Grainger, Inc. is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. Grainger is a distributor of industrial and safety supplies that distributes tools, fasteners, safety supplies, instruments, welding and shop equipment, among others. Other businesses include Zoro, the single channel online business in the United States, and operations in Europe, Asia and Latin America. The Company provides customers with a range of options for finding and purchasing products, utilizing sales representatives, contact centers, direct marketing materials, catalogs and e-commerce. Source: Thomson Financial |
Sharek’s Take |
 Grainger (GWW) stock continues to deteriorate in an unfavorable working environment. Grainger is the leading supplier for maintenance supplies in North America and sells motors, power transmission products, test instruments, lab supplies, power tools, outdoor equipment, as well as janitorial supplies. GWW is a safe stock with a top safety rating of 1 from Value Line. Management has increased the dividend for 44 consecutive years, buys back stock, purchases other supply stores, and invests in technology to spur Internet sales. Unfortunately online sales come with lower profit margin as well as competition. GWW’s energy customers have reduced production (especially Canada), and its customers who export have slower sales due to the dollar. Grainger also has its own F/X issues. Last qtr profits fell 11% as sales declined 1%. Both profit and sales growth aren’t expected to increase year-over-year until the September qtr, and since estimates are declining it could be longer. Plus, at a current price of 18.5x earnings (using today’s quote of $216) the stock a little overvalued — it’s not even on sale! I’ll sell GWW in the Conservative Portfolio and keep it on the radar as it’s a quality company and I will look to buy back in when growth returns. |
One Year Chart |
 These charts were done on 2/2. Today is 2/25 and the stock is $216. GWW got a bounce with the market. Still, the qtrly profit growth picture is poor and the Est LTG fell from 11% to 4% last qtr. This is just a tough year for Grainger. |
Fair Value |
 Although profits aren’t growing, the stock isn’t even on sale. This is a head-scratcher. In the 2008-2010 period the stock sold for 13 to 15 times earnings. Now with GWW at a current price of $216 it sells for 18.5x earnings. That’s too much. |
Bottom Line |
Grainger’s profit estimates have decreased for seven consecutive qtrs and this is a good time to step aside as the stock has rallied some here and is now selling for more than my Fair Value. Still, this is a solid core holding for large accounts and vastly diverse conservative portfolios are welcome to hold for the long run. I will sell GWW from the Conservative Growth Portfolio and will likely buy back at a later time. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
