W W Grainger Wins With Sticky Contracts For Large Clients

Reviewing W W Grainger Inc (NYSE: GWW)'s third-quarter results, Oppenheimer upgraded the stock, which reflected robust demand response to the company's 6 percent net U.S. price re-set.

The firm upgraded shares of W W Grainger from Perform to Outperform, with a $245 price target.

Analysts Christopher Glynn and Patrick Schuchard said, by Aug. 2018, they expect pricing compares to be neutral and above-segment growth from targeted buying segments, transactions that are accretive to U.S. mix. The analysts pointed out that medium-customer demand response outdid large non-contract, reflecting a more nimble demographic.

The analysts expect the response to improve from here, as digital marketing strategies ramp and facilitate demand response. They also noted institutional success with digital strategies at the company.

On the third-quarter metrics, Oppenheimer said the company's adjusted earnings per share exceeded its expectations, while sales trailed. The firm noted adjusted operating margin was above estimates and the gross margin was in line. The company narrowed its 2017 earnings per share, sales growth and operating margin guidance, the firm added.

Oppenheimer also noted that the company guided fourth-quarter gross margins to be down 20-50 basis points, citing the price re-set impacts.

As such, the firm raised its earnings per share estimate for 2017 from $10.45 to $10.65 and that for 2018 from $11 to $11.35, while it introduced a 2019 earnings per share estimate of $13.35.

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