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On Thursday, Wolfe Research issued a downgrade for WW Grainger (NYSE:GWW) stock, moving from a Peerperform to an Underperform rating. Accompanying this downgrade, the firm set a price target of $966.00 for the industrial supply company’s shares, which currently trades at $1,004.92. According to InvestingPro analysis, GWW maintains a "GREAT" financial health score of 3.09, though it’s currently trading at a high P/E ratio of 25.57 relative to its near-term earnings growth.
The shift in rating comes as Wolfe Research expresses concerns over the company’s full-year 2025 guidance, which they believe does not adequately account for the potential impact of tariffs. With 35-40% of the company’s cost of goods sold (COGS) in the United States being subject to import exposure, analysts at Wolfe Research suggest that the guidance framework may be overly optimistic. Despite these concerns, InvestingPro data shows the company maintains strong fundamentals with a gross profit margin of 39.36% and has consistently delivered value to shareholders, having maintained dividend payments for 55 consecutive years.
Analysts estimate that WW Grainger could mitigate approximately 75% of the negative effects from tariffs through pricing strategies and improved productivity. Despite these efforts, Wolfe Research anticipates that the company will likely reach only the lower end of its 15.1-15.5% operating margin (OM) guidance for the fiscal year 2025. The firm also expressed doubt about the company’s ability to maintain year-over-year margins at the higher end of the guidance under the current circumstances. For deeper insights into GWW’s financial metrics and future prospects, investors can access comprehensive analysis through InvestingPro’s detailed research reports, which cover over 1,400 US stocks.
WW Grainger’s stock has been performing poorly in the weeks leading up to the downgrade, further contributing to the cautious stance from Wolfe Research. The downgrade precedes the company’s first-quarter earnings report for 2025, signaling a preemptive concern from the research firm about the forthcoming financial results.
The price target of $966.00 set by Wolfe Research represents their expectation for WW Grainger’s stock value, taking into account the anticipated challenges. This target is intended to reflect the research firm’s analysis of the potential tariff impact on the company’s financial performance.
In other recent news, W.W. Grainger, Inc. reported its fourth-quarter 2024 earnings, showing a slight miss on both earnings per share (EPS) and revenue forecasts. The company’s EPS was $9.71, falling short of the anticipated $9.77, and revenue was $4.23 billion, slightly below the expected $4.25 billion. Despite this, Grainger’s full-year 2024 sales increased by 4.2% to $17.2 billion, with an operating margin of 15.5%. Moody’s Ratings affirmed Grainger’s A2 debt rating and shifted its outlook from stable to positive, citing the company’s strong operating margin and financial leverage. However, Erste Group downgraded Grainger’s stock rating from Buy to Hold, citing projections of lower profit growth in 2025 compared to the previous year. RBC Capital Markets slightly reduced its price target for Grainger from $1,113.00 to $1,112.00, maintaining a Sector Perform rating due to weaker-than-expected performance in its High-Touch Solutions segment. Additionally, Helios Technologies (NYSE:HLIO) announced the appointment of Laura Dempsey Brown as its new Board Chair, succeeding Philippe Lemaitre, who retired after serving since 2007.
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