You might be surprised that I am writing a third note about Grainger within few months, but it is the only Aristocrat (beside BEN, but it is in my portfolio so far), which is close to my investable level. Also share price from mid-term perspective is not high, so all it makes GWW a potential buy target.

On Tuesday company presented financial results for Q2, which were far below expectations.


I am always wondering if results are lower by 0.3$ and share price is down by $10 does it really make sense. If every single result for the next 5 years will be lower by 0.3$ it means $6. Well, does anyone of you remember quarterly results of company from 5 years ago? I think investors overreacted.

Why results were weak?

Let’s review sales performance by customer end market in the United States:

  • Government and Retail were up in the low single digits;
  • Light Manufacturing was flat;
  • Commercial was down in the low single digits;
  • Heavy Manufacturing was down in the mid-single digits;
  • Contractor was down in the high single digits and
  • Natural Resources and Reseller were down in the mid-teens.

Well, industry is under pressure due to weak commodities, but during Q2 some of commodities were up, so in long term I think that clients might increase orders. On the other hand with oil price at around $50 I see risks for shell gas exploration…

What is important online channel was up by 34% on revenues. This is a ray of hope.

Grainger returned $315 million to shareholders through $75 million in dividends and $241 million to buy back 1,033,000 shares of stock. That’s definitely a good news considering market cap of 13.3b (2.4% return yield within quarter), but part of this was financed by increase in debt.

Guidance was narrowed to $11.20 – $12.20 for the year. vs $11.00 – $12.80 previously. Well it is not disaster as guidance is still inside a previous range.

Currently company is valued at P/E = 19 and EV/EBITDA = 10, DY = 2,2%, but also huge buyback programs.


Summing up, after another weak quarterly results I expect share price to be under pressure, which might create an opportunity. I am going to wait patiently and when share price falls below $210 I will consider buying. Well technically if share price drops below $214 I see potential to fall even to around $180, which is a strong buy level for me.


Disclosure GWW – no position