Wolfe Research Upgrades Grainger (GWW) to Peerperform (correction)

Wolfe Research analyst Nigel Coe upgraded Grainger (NYSE: GWW) from Underperform to Peerperform.

The analyst comments "We have been flagging potential for revenue acceleration and earnings momentum for some time. The stock has run higher and the valuation has extended. But we still see an upside skew to FY26/27 Street and valuation is reasonable vs. peers. In conjunction with our 2Q26 Preview (LINK), we are upgrading GWW to Peer Perform. The stock has outperformed post-1Q earnings and valuation has extended to new highs. But we are increasingly confident in continued earnings momentum and view the valuation as reasonable in relation to our Distributor coverage. Core Growth Acceleration: Organic growth is expected to remain at +LDD for the balance of FY26, as the industrial recovery begins to broaden. Critically, we have seen market outgrowth accelerating and see potential to meet or exceed management's 400-500bps target during 2H26. Notably, we look for volume acceleration to substitute for price deceleration through the year. Gross Margin Conservativism: GWW raised FY26 guidance for most KPIs following 1Q26, but left its gross margin guide intact. In the current framework, gross margins are expected to modestly decline from 40% reported in 1Q26 to ~39% over the rest of '26. We understand that inflation pressures are expected to pick up, particularly on private label products, but s122 tariffs should be an offset. Overall, gross margin guidance screens at the low end of recent trend when adjusted for LIFO charges, suggesting conservatism and potential for over-achievement. Valuation Screens Reasonable (Not Cheap): Valuation has pushed back towards prior highs and is extended relative to history, at ~28x NTM P/E and above the 5Y median of ~22x. However, we see an upside bias to estimates and note that GWW's multiple screens as reasonable relative to our broader distributor coverage when we consider its more elevated margin and ROIC. Our YE26 base case fair value has increased by 12% to $1,462 and embeds ~28x P/E on FY27 EPS, which implies ~8% upside; we see risk of ~28% downside if GWW were to de-rate to its 5-yr median multiple. Overall, we believe that risk/reward for GWW is now more balanced relative to our coverage universe, which drives our upgrade to a Peer Perform rating."

For an analyst ratings summary and ratings history on Genworth Financial click here. For more ratings news on Genworth Financial click here.

Shares of Genworth Financial closed at $9.20 yesterday.

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