Grainger raises 2026 outlook as both operating segments accelerate

Grainger raises 2026 earnings target after strong quarter

W.W. Grainger, Inc. (NYSE:GWW) has raised its full-year outlook after a quarter in which adjusted diluted earnings per share climbed 22.8% to US$12.54. Sales rose 11.3% to US$5.181 billion, while the company lifted its adjusted 2026 EPS range to US$47.00-US$48.00 from US$45.50-US$47.25.

The upgraded forecast also includes higher revenue and operating cash flow expectations. Grainger now sees full-year sales of US$19.8 billion to US$20.0 billion, compared with its previous range of US$19.4 billion to US$19.7 billion, and operating cash flow of US$2.35 billion to US$2.45 billion.

Endless Assortment leads organic sales growth

Both of Grainger’s main divisions expanded, although the online-focused Endless Assortment segment delivered the faster underlying growth. Reported sales increased 11.9%, or 19.3% on a daily, organic constant-currency basis, with gains at MonotaRO and Zoro. High-Touch Solutions - N.A. sales rose 13.8% on both reported and daily constant-currency measures, supported by double-digit volume growth and the passing through of cost increases.

Group gross margin improved by 20 basis points to 38.8%. Endless Assortment contributed a 90-basis-point margin improvement, while High-Touch Solutions - N.A. margin fell 30 basis points to 40.8% because of freight expense and mix. Grainger said sales leverage in both segments helped lift adjusted operating margin to 16.1%, up from 15.2% a year earlier.

Reported profit comparison carries prior-year distortion

The headline GAAP numbers were even stronger: reported operating earnings rose 62.0% to US$828 million and reported diluted EPS more than doubled to US$12.42. That comparison is not clean, however. The prior-year quarter included a loss tied to Grainger’s exit from the UK, including the sale of the Cromwell business and closure of Zoro UK, while the current period included US$8 million of transaction costs linked to technology assets acquired from Adroit Worldwide Media.

On the company’s adjusted measure, which excludes those items, operating earnings rose 18.2% to US$836 million and net earnings attributable to Grainger increased 21.0% to US$593 million. The reported tax rate also fell sharply to 24.3% from 34.7%, although the adjusted tax-rate comparison was more modest at 24.3% versus 24.8%.

Cash generation supports shareholder returns

Grainger generated US$661 million in operating cash flow and US$546 million in free cash flow during the quarter after US$115 million of capital expenditure. It returned US$396 million to shareholders through dividends and share repurchases, including US$278 million spent buying back stock and US$145 million in dividends.

The updated plan narrows the expected full-year share-buyback range to US$975 million-US$1.025 billion and trims the capital expenditure range to US$575 million-US$625 million. The stronger cash outlook therefore sits alongside a slightly more restrained deployment forecast, while the company expects Endless Assortment’s full-year operating margin to reach 10.9%-11.1%, up from its previous 10.4%-10.8% range.