W.W. Grainger’s third quarter results were shaped by persistent inflationary pressures, tariff-related inventory cost headwinds, and continued focus on operational execution. Management highlighted that customer demand for maintenance and repair solutions remained steady, particularly among contractor and healthcare segments, while manufacturing customers showed signs of improvement. CEO Donald Macpherson emphasized the company’s ability to support customers’ operational efficiency, noting, “the value of the fundamentals of having inventory where and when they need it.” Despite headwinds from tariffs and LIFO accounting impacts, Grainger credited productivity initiatives and targeted price actions for supporting margins during the period.
Is now the time to buy GWW? Find out in our full research report (it’s free for active Edge members).
W.W. Grainger (GWW) Q3 CY2025 Highlights:
- Revenue: $4.66 billion vs analyst estimates of $4.64 billion (6.1% year-on-year growth, in line)
- Adjusted EPS: $10.21 vs analyst estimates of $9.95 (2.6% beat)
- Adjusted EBITDA: $772 million vs analyst estimates of $739.3 million (16.6% margin, 4.4% beat)
- The company slightly lifted its revenue guidance for the full year to $17.9 billion at the midpoint from $17.85 billion
- Adjusted EPS guidance for the full year is $39.38 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 11%, down from 15.6% in the same quarter last year
- Organic Revenue rose 5.4% year on year vs analyst estimates of 5.7% growth (30.7 basis point miss)
- Market Capitalization: $45.3 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From W.W. Grainger’s Q3 Earnings Call
- David Manthey (Baird) asked about the financial impact of the U.K. business exit. CFO Deidra Merriwether clarified it would reduce fourth quarter sales by $40 million and modestly improve annual operating margin.
- Christopher Snyder (Morgan Stanley) inquired about gross margin trends and LIFO headwinds. Merriwether explained that while LIFO remains a drag, gross margins should stabilize near 39% as inflationary impacts recede.
- Jacob Levinson (Melius Research) questioned the rationale for retaining LIFO accounting. CEO Donald Macpherson said switching to FIFO would require a large tax payment, so the company is not considering a change for now.
- Ryan Merkel (William Blair) sought clarity on the magnitude of the government shutdown impact. Macpherson estimated a daily one-point impact on total sales, with longer shutdowns posing greater risk.
- Christopher Glynn (Oppenheimer & Company) asked about AI’s impact on growth and margins. Macpherson noted investments in both customer-facing and back-end AI applications, aiming to enhance customer experience and operational efficiency.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be watching (1) how effectively Grainger manages additional price increases to offset ongoing tariff and inflation pressures, (2) the operational and margin impact following the full exit from the U.K. market, and (3) the adoption and productivity gains from technology and AI investments. Developments in the government shutdown’s resolution and the pace of gross margin normalization will also be key signposts.
W.W. Grainger currently trades at $952.66, in line with $955.76 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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