W.W. Grainger’s second quarter saw revenue climb as the company navigated a challenging environment, but the market responded sharply negatively to the results. Management highlighted that tariff-related inventory accounting and price/cost timing issues weighed on profitability, particularly through LIFO (last-in, first-out) inventory impacts. CEO Donald Macpherson pointed out that demand from contractor and healthcare customers was a bright spot, offsetting muted trends elsewhere, while CFO Dee Merriwether emphasized that most margin pressure was transitory, stemming from accounting rather than operational weaknesses. The leadership acknowledged that underlying operations would have shown more robust earnings growth without the LIFO headwinds.
Is now the time to buy GWW? Find out in our full research report (it’s free).
W.W. Grainger (GWW) Q2 CY2025 Highlights:
- Revenue: $4.55 billion vs analyst estimates of $4.53 billion (5.6% year-on-year growth, 0.6% beat)
- EPS (GAAP): $9.97 vs analyst expectations of $10.06 (0.9% miss)
- Adjusted EBITDA: $742 million vs analyst estimates of $743.8 million (16.3% margin, in line)
- The company reconfirmed its revenue guidance for the full year of $17.85 billion at the midpoint
- EPS (GAAP) guidance for the full year is $40.25 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 14.9%, in line with the same quarter last year
- Organic Revenue rose 5.1% year on year vs analyst estimates of 5.4% growth (26.3 basis point miss)
- Market Capitalization: $45.95 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 Q2 Earnings Call
- David Manthey (Baird) asked about the LIFO accounting impact, and CFO Dee Merriwether clarified that most of the margin pressure was due to LIFO, not operational weakness, and that underlying EPS growth would have been higher on a FIFO basis.
- Thomas Moll (Stephens) questioned the rationale for delaying price increases until September, to which CEO Donald Macpherson responded that maintaining a predictable schedule supports customer relationships and long-term loyalty.
- Chris Snyder (Morgan Stanley) pressed on why Grainger was not seeing the same disruption-driven tailwinds as during COVID, and Macpherson explained that the current environment lacks major supply shocks, though Grainger is still gaining share.
- Ken Newman (KeyBanc Capital Markets) inquired about price elasticity and customer volume as tariffs are passed through, and Macpherson replied that demand is expected to be soft, but Grainger’s approach is aligned with competitors, and confidence remains in price realization.
- Patrick Baumann (JPMorgan) asked if margin expansion could resume in 2026 as LIFO impacts roll off, which Merriwether and Macpherson agreed was reasonable barring further unexpected changes.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will focus on (1) the pace and effectiveness of September pricing actions in offsetting tariff-driven cost increases, (2) whether gross margin begins to recover as LIFO impacts cycle out, and (3) ongoing growth and profitability in the Endless Assortment segment, especially as Zoro and MonotaRO execute on digital and assortment optimization. How Grainger adapts to evolving competitive and supply chain pressures will also be closely watched.
W.W. Grainger currently trades at $962, down from $1,040 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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