Oppenheimer Gives Color On W.W Grainger Following Management Meetings

Oppenheimer met with W.W Grainger GWW management and discussed the mechanics of ongoing strategies and initiatives supporting growth and margin expansion opportunities. Margin drivers are diverse, including systematic execution on driving mix benefits from expansion of private-label global sourcing and eCommerce, price/cost strategies, improving local scale in overseas businesses, and coming enhancements to the network of distribution centers.

Product-line expansion now accounts for about $1.3B in annual sales, and with no trailing off of new SKU productivity, Oppenheimer remains comfortable that top line should see 3-4 pts of annual benefit from share gain for some time.

2011 daily sales so far have held little surprise, and the only near-term wrinkle appears to be the 2-3 point oil spill headwind in 2H11, which we believe could be offset by robust trends out of the Canada unit. Additionally, recent ISM numbers, including low inventory readings, could augur well for US demand.

Oppenheimer is raising its price target to $158 from $148 and maintains an Outperform rating on GWW.

GWW closed Monday at $135.53