On Thursday, RBC Capital Markets adjusted its financial outlook for WW Grainger (NYSE:GWW), reducing the price target from $1,125.00 to $1,113.00, yet keeping a Sector Perform rating on the company’s stock. The move comes as the firm anticipates Grainger’s initial 2025 guidance to potentially be cautious, possibly reflecting the company’s recent shortfalls in the High-Touch Solutions (HTS) U.S. segment.Want deeper insights into GWW’s valuation and growth potential? InvestingPro offers comprehensive analysis through its exclusive Pro Research Report, featuring detailed financial health scores and expert insights that go beyond traditional metrics.
RBC Capital forecasts Grainger’s fourth-quarter 2024 earnings per share (EPS) at $9.72, which is slightly below the consensus estimate of $9.76. The analysts project organic sales growth of 6.1%, just under the consensus of 6.2%, and expect an expansion in EBIT margin by 30 basis points year-over-year to 14.9%, compared to the consensus prediction of 15.1%. Despite anticipating some level of sequential improvement in Grainger’s short-cycle industrial mix, RBC Capital remains cautious due to the company’s HTS U.S. performance issues. InvestingPro subscribers gain access to over 30 key financial metrics and real-time analysis tools to evaluate such forecasts against historical performance patterns and industry benchmarks.
The analysts noted that although Grainger has reaffirmed its long-term goal to outgrow the market by 400-500 basis points annually, its year-to-date performance is only tracking at approximately 70 basis points. This shortfall is partly attributed to the discrepancy between Producer Price Index (PPI) and Industrial Production (IP) metrics, leading to increased scrutiny on Grainger’s market share gains. The report suggests that Zoro’s business-to-business operations and MonotaRo’s small to mid-sized customer segments could be the key drivers of Grainger’s performance.
Regarding potential challenges, Grainger could face supply chain disruptions stemming from large-scale tariffs against China. For the 2025 EPS guidance, RBC Capital expects Grainger to initiate a range of $41.10 to $42.60, surrounding their own estimate of $42.15 and aligning closely with the consensus of $42.14.
Organic sales guidance is anticipated to be set between 4% to 7%, with RBC Capital’s estimate at 5.8% and the consensus at 5.9%. Additionally, the firm predicts that gross margin guidance could be in the range of 39.0% to 39.3%, consistent with their estimate and the consensus, both at 39.1%.
In other recent news, Fortive (NYSE:FTV) Corporation reported a 14% increase in adjusted earnings per share (EPS) and a 12% rise in free cash flow in the third quarter of 2024. The company’s Advanced Healthcare Solutions (AHS) and Intelligent Operating Solutions (IOS) segments contributed significantly to these results.
Despite customer delays in its Fluke and FAL businesses, Fortive expects continued momentum in recurring revenue and a gradual recovery in Precision Technologies. The company’s full-year 2024 adjusted EPS guidance has been updated, now expecting a slight increase of about $0.03 at the midpoint, resulting in a new forecast of $3.84 to $3.87.
Meanwhile, 3M Company (NYSE:MMM) reported a 1% organic revenue growth and an 18% rise in non-GAAP earnings per share in the third quarter. Despite these positive developments, the company faced challenges, including a $3.6 billion legal settlement and unresolved liabilities related to per- and polyfluoroalkyl substances (PFAS). Notwithstanding these challenges, 3M returned $1.1 billion to shareholders through dividends and share repurchases and generated a free cash flow of $1.5 billion for Q3.
In analyst notes, UBS initiated coverage on Fortive Corporation stock with a Neutral rating and a price target of $84.00. On the other hand, Truist Securities adjusted its outlook on Fortive, reducing the price target to $89 from $90, though still maintaining a Buy rating. These recent developments provide insights into the financial performance and market stance of both Fortive Corporation and 3M Company.
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