Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of distributor W.W. Grainger
So what: Second-quarter sales rose 12% to $2.2 billion and earnings per share of $2.63 were up 18% from last year after adjusting for a tax benefit. Analysts had expected earnings per share of $2.62.
What is really driving the stock higher is the company's rosy outlook for fiscal 2012. The company expects sales to rise 12% to 14% and earnings per share to hit $10.50 to $10.80. Both are above the average expectation.
Now what: The growth is impressive, considering the competition in retail right now. What I'm more worried about is the value investors are getting in shares. Even at the high end of estimates shares are trading at 19 times 2012 earnings, not a price I'm willing to pay. I'll pass on the move and look for better value in shares down the road.
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Editor's note: The original version of this article incorrectly listed analyst EPS estimates for W.W. Grainger. We regret the error.
