- Price
- $1314.51
- Fair value
- $1440.00
- Discount
- 8.7%
- Uncertainty
- Medium
- LSEG rating
- 2.80
- Moat
- Wide
- Next earnings
- 2026-11-04
- Next earnings is estimate
- No
- Company name
- Grainger
- Sector
- Industrial distribution
- About
- Grainger is a large distributor of maintenance, repair and operating (MRO) products, such as safety equipment, tools, pumps and lighting. It buys products from more than 5,000 suppliers and resells them to more than 4.6 million customers, mainly in North America and Japan. It makes money from the gross margin between what it pays for products and what it charges, which was about 39.5% of sales in Q2 2026. The High-Touch Solutions segment serves mid-size and large businesses with complex needs through sales staff, branches, distribution centers and next-day delivery. The Endless Assortment segment sells millions of products online through Zoro in the US and MonotaRO in Japan. The US gave about 81% of sales in 2025. Grainger left the UK market in the fourth quarter of 2025. Revenue in 2025 was $17.9 billion.
- Thesis
- Grainger trades at a discount because investors doubt that its 2026 margin gains will last. In Q2 2026, refunds of IEEPA tariffs lowered the cost of goods sold by $43 million, about 90 basis points of gross margin, and management said that this benefit will mostly not repeat. Management guided the Q3 2026 operating margin to the mid-15% range, down from 16.1% in Q2. Part of the 2026 sales growth also comes from price increases that pass on tariff, fuel and freight costs, and from temporary prebuying at MonotaRO. Investors fear that growth slows and margins fall when these effects end. The stock fell about 6% before the market opened on August 4, 2026, although the results were above estimates. The CFO also left on September 4, 2026, and an interim CFO serves while the company looks for a new one. For the gap to close, Grainger must show that sales grow at about 12% on a daily, organic constant currency basis in Q3 2026, that the operating margin stays near the mid-15% range without tariff refunds, and that its 2027 outlook keeps volume growth above the MRO market. A permanent CFO must also be named. The first test is the Q3 2026 report on November 4, 2026. The second test is the Q4 2026 report and the 2027 guidance on February 2, 2027. If margins hold, the gap can close over the next two to four quarters. The main risk is a slowdown in US industrial demand when price inflation fades.
- Risks
- The Q2 2026 margin included $43 million of one-time IEEPA tariff refunds. Management guided the Q3 2026 operating margin down to the mid-15% range. Higher freight and fuel costs, linked to the conflict in the Middle East, and lower margins on private label products and large projects also press on gross margin.
Part of the 2026 sales growth comes from higher prices that pass on tariff and freight costs, and from about $45 million of temporary prebuying at MonotaRO in Q2 2026. When price inflation fades, sales growth can slow to the rate of volume growth.
Demand for MRO products follows US industrial activity. A recession or a fall in factory output lowers sales, because about 81% of 2025 sales came from the US.
Grainger competes with manufacturers that sell directly, other distributors, retailers and online businesses. If large online sellers win more customers on price and range, Grainger can lose share or must cut prices.
Grainger has only an interim CFO since September 5, 2026. A long search or a change in financial policy can add uncertainty.
- Balance sheet
- Cash: $589M
Debt: $2.4B
Net debt: $1.8B
EBITDA, last 12 months: $3.0B
Net debt / EBITDA: 0.6× (low)
Interest cover: 39×
Undrawn credit line: $1.3B, to October 2028
Debt due within 12 months: $2.0M
Last debt due: 2047
Ratings: Moody's A1, S&P A+
Grainger has little debt for its size. At June 30, 2026, most debt was $2.3 billion of unsecured senior notes that mature from 2034 to 2047. MonotaRO also has Japanese yen term loans of $126 million that it repays from September 2028 to June 2035. Only $2 million was due within one year, after Grainger repaid $125 million of commercial paper in the first half of 2026. EBITDA is operating earnings plus depreciation and amortization for the 12 months to June 2026, and it includes charges from the exit from the UK in 2025. Interest cover is for the first half of 2026. The company had about $1.8 billion of available liquidity at June 30, 2026. The $1.25 billion revolving credit facility, which supports the commercial paper program, runs for five years from October 2023. Total debt was 34.8% of total capital at June 30, 2026. In 2026, Grainger plans to spend $975 million to $1.05 billion on buybacks and expects $2.25 billion to $2.4 billion of operating cash flow.
As of 2026-06-30.
- Checkpoints
- Nov 4, 2026: Q3 2026 results: margin without tariff refunds. Pending. Watch: Daily, organic constant currency sales growth near 12% and an operating margin in the mid-15% range pass; a lower margin or a cut to the 2026 guidance fails.
Feb 2, 2027: Q4 2026 results and 2027 guidance. Pending. Watch: A 2027 outlook with volume growth above the MRO market and a stable operating margin passes; guidance that depends on price increases alone or shows a lower margin fails.
May 2027 (estimate): Q1 2027 results: growth after price inflation. Pending. Watch: Sales growth that holds as tariff-driven price increases fade, and a permanent CFO in place, pass; a sharp slowdown in volume fails.
- Recent events
- 2026-09-04: CFO Deidra Merriwether left the company to pursue another opportunity. Laurie Thomson, Vice President and Controller, became interim CFO on September 5, 2026. Grainger started a search for a permanent CFO.
2026-08-26: Grainger bought the technology, intellectual property and staff of Adroit Worldwide Media for $210 million in cash. The assets help customers manage their MRO inventory in the High-Touch Solutions segment. Grainger plans a commercial pilot over the next several months and expects no material effect on near-term results.
2026-08-19: Grainger opened a new, automated Northwest distribution center in Gresham, Oregon. It started to ship orders in July 2026.
2026-08-04: Grainger reported Q2 2026 results. Sales were $5.02 billion, up 10.3%, or 13.7% on a daily, organic constant currency basis. Diluted EPS was $12.01, up 20.5%. Refunds of IEEPA tariffs lowered the cost of goods sold by $43 million. Grainger raised its 2026 EPS guidance to $45.50 to $47.25 and said the Q3 operating margin will be in the mid-15% range. The stock fell about 6% before the market opened.
2026-07-31: Grainger said that CFO Deidra Merriwether will resign, effective September 4, 2026. The company said that her decision is not because of a disagreement about its operations or financial statements.
2026-05-07: Grainger reported Q1 2026 results. Sales were $4.74 billion, up 10.1%, or 12.2% on a daily, organic constant currency basis. Diluted EPS was $11.65, up 18.2%. Grainger raised its 2026 EPS guidance to $44.25 to $46.25.
2026-04-29: Grainger increased its quarterly dividend by 10%.