W.W. Grainger, Inc. (GWW) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of W.W. Grainger (GWW)? Shares have been on the move with the stock up 25.7% over the past month. The stock hit a new 52-week high of $676.12 in the previous session. W.W. Grainger has gained 21.5% since the start of the year compared to the 8.6% move for the Zacks Industrial Products sector and the 21.4% return for the Zacks Industrial Services industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 2, 2023, W.W. Grainger reported EPS of $7.14 versus consensus estimate of $6.97 while it beat the consensus revenue estimate by 1.06%.
For the current fiscal year, W.W. Grainger is expected to post earnings of $30.70 per share on $15.89 billion in revenues. This represents a 3.51% change in EPS on a 4.32% change in revenues. For the next fiscal year, the company is expected to earn $33.28 per share on $17.05 billion in revenues. This represents a year-over-year change of 8.39% and 7.3%, respectively.
W.W. Grainger may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
W.W. Grainger has a Value Score of B. The stock's Growth and Momentum Scores are B and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 22X current fiscal year EPS estimates, which is a premium to the peer industry average of 14.8X. On a trailing cash flow basis, the stock currently trades at 19.6X versus its peer group's average of 14.3X. Additionally, the stock has a PEG ratio of 1.69. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, W.W. Grainger currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if W.W. Grainger meets the list of requirements. Thus, it seems as though W.W. Grainger shares could have potential in the weeks and months to come.
How Does GWW Stack Up to the Competition?
Shares of GWW have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Siemens AG (SIEGY). SIEGY has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. Siemens AG beat our consensus estimate by 12.67%, and for the current fiscal year, SIEGY is expected to post earnings of $4.42 per share on revenue of $75.62 billion.
Shares of Siemens AG have gained 10.3% over the past month, and currently trade at a forward P/E of 17.72X and a P/CF of 16.81X.
The Industrial Services industry is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for GWW and SIEGY, even beyond their own solid fundamental situation.
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