W.W. Grainger (GWW)

Maintenance and repair supplier W.W. Grainger (NYSE:GWW) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 4.5% year on year to $4.43 billion. The company expects the full year’s revenue to be around $18.9 billion, close to analysts’ estimates. Its GAAP profit of $9.44 per share was 4.1% below analysts’ consensus estimates.

Company Overview

Founded as a supplier of motors, W.W. Grainger (NYSE:GWW) provides maintenance, repair, and operating (MRO) supplies and services to businesses and institutions.

Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Maintenance and repair distributors that boast reliable selection and quickly deliver products to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is still a real threat, forcing investment in omnichannel capabilities to serve customers everywhere. Additionally, maintenance and repair distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.

Competitors in the operating (MRO) supplies industry include Fastenal (NASDAQ:FAST), MSC Industrial Direct (NYSE:MSM), and HD Supply (NASDAQ:HDS).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, W.W. Grainger’s 8.7% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. W.W. Grainger’s recent performance shows its demand has slowed as its annualized revenue growth of 4.3% over the last two years was below its five-year trend.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, W.W. Grainger’s organic revenue averaged 4.8% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, W.W. Grainger reported modest year-on-year revenue growth of 4.5% but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not lead to better top-line performance yet.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

W.W. Grainger’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 38.6% gross margin over the last five years. Said differently, roughly $38.62 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

W.W. Grainger produced a 39.5% gross profit margin in Q4, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

W.W. Grainger has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.4%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, W.W. Grainger’s operating margin rose by 2 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, W.W. Grainger generated an operating margin profit margin of 14.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

W.W. Grainger’s EPS grew at an astounding 22.5% compounded annual growth rate over the last five years, higher than its 8.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of W.W. Grainger’s earnings can give us a better understanding of its performance. As we mentioned earlier, W.W. Grainger’s operating margin was flat this quarter but expanded by 2 percentage points over the last five years. On top of that, its share count shrank by 11.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For W.W. Grainger, its two-year annual EPS declines of 1.1% mark a reversal from its (seemingly) healthy five-year trend. We hope W.W. Grainger can return to earnings growth in the future.

In Q4, W.W. Grainger reported EPS of $9.44, down from $9.71 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects W.W. Grainger’s full-year EPS of $35.39 to grow 23.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

W.W. Grainger has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 7.8% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that W.W. Grainger’s margin expanded by 2.2 percentage points during that time. This is encouraging because it gives the company more optionality.

W.W. Grainger’s free cash flow clocked in at $269 million in Q4, equivalent to a 6.1% margin. This result was good as its margin was 2.1 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although W.W. Grainger hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 36.6%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, W.W. Grainger’s ROIC increased by 1.8 percentage points annually over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

W.W. Grainger reported $585 million of cash and $2.86 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.96 billion of EBITDA over the last 12 months, we view W.W. Grainger’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $41 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see W.W. Grainger narrowly top analysts’ revenue expectations this quarter. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its EPS missed and its full-year EPS guidance fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $1,102 immediately following the results.

Updated: February 3, 2026 at 8:14 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in W.W. Grainger.

W.W. Grainger has a few positive attributes, but it doesn’t top our wishlist. To kick things off, its revenue growth was good over the last five years. And while W.W. Grainger’s organic revenue growth has disappointed, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

W.W. Grainger’s P/E ratio based on the next 12 months is 25x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $1,082 on the company (compared to the current share price of $1,102).