Valuation Full - Reiterate Neutral

Q218 delivered meaningful EPS upside and GWW is executing well, while raised FY18 guidance may still prove too conservative. However, we view the current valuation as discounting the latter and at risk as the US pricing reset / restructuring actions are completed.

Good Start to Q118 / Valuation Full

GWW shares rose 5% yesterday which fairly reflects the 9% mid-point increase to FY18 EPS guidance (+$1.35-1.15 → $14.30-15.30). We have raised our FY18/19 EPS estimates by $1.20/$0.95. However, at ~17.5x (113% S&P500-relative) our revised FY19E EPS estimate we view the valuation as full.

Progress Being Made but Valuation Fair

Volume growth has responded well to US pricing actions and a robust industrial economy bodes well for FY18, while restructuring actions support margin improvement through FY19. However, margin trajectory thereafter remains a key question and is likely to cap the valuation. Hence, we remain Neutral.

Model Update Post-Q417

FY18/19 EPS estimates move higher largely to reflect US tax reform, and to a lesser extent benefits from ongoing restructuring actions. PT increased on higher EPS estimates, but no change to Neutral rating.

Upgrading to Neutral - Signs of Progress

Upgrading to Neutral - Signs of Progress

Q317: EPS Ahead / FY17 Guidance Narrowed

Q317: EPS Ahead / FY17 Guidance Narrowed