W.W. Grainger (GWW)

Maintenance and repair supplier W.W. Grainger (NYSE:GWW) met Wall Streets revenue expectations in Q3 CY2025, with sales up 6.1% year on year to $4.66 billion. On the other hand, the company’s full-year revenue guidance of $17.9 billion at the midpoint came in 0.7% below analysts’ estimates. Its non-GAAP profit of $10.21 per share was 2.6% above 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. Over the last five years, W.W. Grainger grew its sales at a decent 8.7% compounded annual growth rate. 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 4.4% over the last two years was below its five-year trend.

We can dig further into 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 4.9% 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 grew its revenue by 6.1% year on year, and its $4.66 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months. While this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

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 38.4% gross margin over the last five years. Said differently, roughly $38.43 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

In Q3, W.W. Grainger produced a 38.6% gross profit margin, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, 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 a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

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 14.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, W.W. Grainger’s operating margin rose by 2.9 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, W.W. Grainger generated an operating margin profit margin of 11%, down 4.7 percentage points year on year. Since W.W. Grainger’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

W.W. Grainger’s EPS grew at an astounding 19.4% 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 W.W. Grainger’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, W.W. Grainger’s operating margin declined this quarter but expanded by 2.9 percentage points over the last five years. Its share count also shrank by 11.1%, and these factors together 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 more recent period because it can provide insight into an emerging theme or development for the business.

For W.W. Grainger, its two-year annual EPS growth of 5.9% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, W.W. Grainger reported adjusted EPS of $10.21, up from $9.87 in the same quarter last year. This print beat analysts’ estimates by 2.6%. Over the next 12 months, Wall Street expects W.W. Grainger’s full-year EPS of $39.75 to grow 7.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 8% over the last five years, better than the broader industrials sector.

W.W. Grainger’s free cash flow clocked in at $339 million in Q3, equivalent to a 7.3% margin. The company’s cash profitability regressed as it was 4.6 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative 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 36.1%, 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 3.4 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 $535 million of cash and $2.72 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 $2.76 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 $38 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 meet analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its EBITDA missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $958.15 immediately after reporting.

Updated: December 3, 2025 at 10:22 PM EST

Before deciding whether to buy W.W. Grainger or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

W.W. Grainger isn’t a bad business, but we have other favorites. First 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 22.6x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $1,051 on the company (compared to the current share price of $971.53).