GWW

A month has gone by since the last earnings report for W.W. Grainger (GWW). Shares have lost about 0% in that time frame, outperforming the S&P 500. Will the recent trend continue leading up to its next earnings release, or is W.W. Grainger due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for W.W. Grainger, Inc. before we dive into how investors and analysts have reacted as of late. Grainger reported second-quarter 2026 earnings of $12.01 per share, up 20.5% year over year. The figure beat the Zacks Consensus Estimate of $11.28 by 6.47%, aided by strong sales growth, and wider gross and operating margins. Quarterly sales increased 10.3% year over year to $5.02 billion and surpassed the consensus estimate of $4.95 billion by 1.35%. Daily sales advanced 10.3%, reflecting solid momentum across both operating segments. We predicted daily sales to increase 8.5%. On a daily, organic constant currency basis, sales increased 13.7%. The comparison adjusts for foreign currency movements and the company’s exit from the U.K. market, including the divested Cromwell business and closed Zoro U.K. operations. The High-Touch Solutions N.A. segment’s daily sales rose 11.9% year over year in the second quarter of 2026, reflecting strong volume growth and a healthy contribution from pricing. The Endless Assortment segment’s daily sales grew 13.5% year over year in the quarter, supported by strong performances at MonotaRO and Zoro. Gross profit increased 13% year over year to $1.98 billion. The gross margin expanded 100 basis points to 39.5%, supported by improvement in both segments and benefits related to the U.K. market exit. The quarter included $43 million in refunds on IEEPA tariffs for products directly imported by Grainger. These refunds reduced the cost of goods sold and provided a roughly 90-basis-point benefit to the gross margin. The cost of sales came in at $3.04 billion, 8.5% year over year. Selling, general and administrative expenses rose 9.3% to $1.18 billion. Grainger’s operating earnings in the quarter increased 19% year over year to $807 million. The operating margin came in at 16.1% compared with 14.9% in the prior-year quarter. The company had cash and cash equivalents of $589 million as of June 30, 2026, compared with $585 million at the end of 2025. The cash flow from operating activities was $1.18 billion in the first six months of 2026 compared with $1.02 billion in the prior-year period. Long-term debt was $2.41 billion as of June 30, 2026, compared with $2.36 billion as of Dec. 31, 2025. Grainger returned $341 million to shareholders through dividends and share repurchases during the quarter. Grainger raised its 2026 net sales guidance to $19.4-$19.7 billion from $19.2-$19.6 billion. The company expects reported sales growth of 8.4-10% from the prior mentioned 6.7-9.1%. The adjusted earnings guidance was increased to $45.50-$47.25 per share from $44.25-$46.25. Grainger also raised its operating margin outlook to 15.8-16.2% and the gross margin forecast to 39.3-39.6%. The updated outlook reflects strong first-half execution, improving MRO market demand and better top-line leverage. It turns out, estimates review have trended downward during the past month. At this time, W.W. Grainger has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors. Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, W.W. Grainger has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

W.W. Grainger stock has delivered strong long term gains over the past five years, yet the latest valuation checks suggest the current share price is rich compared with an intrinsic value estimate and traditional multiples. With both the Discounted Cash Flow (DCF) intrinsic value estimate and market based multiples pointing to an overvalued profile, the stock invites closer scrutiny at around US$1,306 per share. W.W. Grainger has returned about 219.5% over five years, which puts extra focus on whether the current price leaves much room for further compounded gains. Recent moves to acquire technology assets from Adroit Worldwide Media and expand distribution capacity in Oregon can support longer term cash flow, but execution risks around integration costs, supply chain efficiency and demand conditions may weigh on what investors are willing to pay. None of the broader valuation cross checks flag W.W. Grainger as a bargain, so the stock currently leans expensive rather than clearly cheap on these measures. The issue now is whether W.W. Grainger's current price fully reflects its intrinsic value or whether the recent strength has pushed the stock beyond what its cash flows can reasonably support. Spot opportunities beyond W.W. Grainger by scanning a curated list of companies with stronger valuation support using the 44 high quality undervalued stocks. The Discounted Cash Flow (DCF) model estimates what W.W. Grainger is worth based on the cash it is expected to generate for shareholders. For W.W. Grainger, the model uses last twelve month free cash flow of about $1.55b and assumes those cash flows continue to grow over time, which is consistent with the 2 Stage Free Cash Flow to Equity framework used. On these assumptions the DCF model points to an intrinsic value of about $1,180 per share, compared with the current price of around $1,306. That implies the stock screens about 10.7% overvalued on this cash flow view. The recent acquisition of technology assets from Adroit Worldwide Media and the new Oregon distribution center help explain why the market is willing to pay a premium, even though the cash flow based estimate sits below the share price. On this DCF view, W.W. Grainger currently looks overvalued relative to its estimated intrinsic value. Our Discounted Cash Flow (DCF) analysis suggests W.W. Grainger may be overvalued by 10.7%. Discover 44 high quality undervalued stocks or create your own screener to find better value opportunities. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for W.W. Grainger. For a mature distributor like W.W. Grainger, the P/E ratio is a useful shorthand because earnings remain a key anchor for how investors look at the stock. W.W. Grainger trades on a P/E of about 32.9x, which is above both the trade distributors industry average of roughly 25.8x and the peer average of about 27.9x. In addition, a more tailored fair P/E ratio that blends factors such as size, profitability profile and sector risk comes out at about 29.0x. That is still below where the stock changes hands today. The gap between the current multiple and this fair ratio suggests investors are paying a premium relative to what the company specific model implies. Even allowing for W.W. Grainger's scale and recent moves in technology and distribution capacity, the earnings multiple points to a full valuation. On the P/E yardstick, W.W. Grainger stock currently looks overvalued compared with both its industry and a more tailored fair multiple. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for W.W. Grainger pick up where this valuation puzzle leaves off and explain what kind of future growth, margins and earnings would need to occur for the stock to be worth materially more or less than today’s price, based on assumptions you can see and evaluate. Each Narrative connects a specific fair value view to a clear story about W.W. Grainger's possible catalysts and risks so you can follow which scenario appears to be unfolding over time on the Community page. The W.W. Grainger community is split between those who see more upside baked into digital and assortment execution and those who think the current price already reflects most of that story. Bull case: 13% undervalued Read the full Bull Case to see why W.W. Grainger could be undervalued Bear case: roughly fairly valued Read the full Bear Case to see why W.W. Grainger could be overvalued Do you think there's more to the story for W.W. Grainger? Head over to our Community to see what others are saying! For W.W. Grainger, both the Discounted Cash Flow (DCF) intrinsic value estimate and the P/E based checks currently point to a stock that appears overvalued rather than one with clear valuation support. The key question is whether future cash flows and margins can grow into the premium that the market is already paying. If management executes well on technology integration and distribution investments, that premium may look more defensible. If integration costs or demand conditions disappoint, the main risk is that the valuation multiple adjusts instead, with the share price reflecting a lower earnings or cash flow outlook. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include GWW. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

W.W. Grainger’s second quarter was marked by solid execution but was met with a sharp negative market reaction, as shares declined over 5% post-results. Management pointed to robust growth in both the High-Touch and Endless Assortment segments, driven by ongoing demand in manufacturing and government markets, as well as increased project-based activity. CEO Donald Macpherson emphasized the company’s ability to deliver “exceptional service to customers” and noted that broad-based acceleration across end markets contributed to the year-over-year sales increase. However, the period was also shaped by product mix headwinds and higher freight costs, which weighed on gross margins despite tariff refunds recognized during the quarter. Is now the time to buy GWW? Find out in our full research report (it’s free). Revenue: $5.02 billion vs analyst estimates of $4.96 billion (10.3% year-on-year growth, 1.2% beat) Adjusted EPS: $12.01 vs analyst estimates of $11.30 (6.3% beat) The company slightly lifted its revenue guidance for the full year to $19.55 billion at the midpoint from $19.4 billion Adjusted EPS guidance for the full year is $46.38 at the midpoint, beating analyst estimates by 1.6% Operating Margin: 16.1%, up from 14.9% in the same quarter last year Organic Revenue rose 13.7% year on year (beat) Market Capitalization: $61.11 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. David Manthey (Baird) asked about the remaining impact of tariff refunds in the coming quarters. CFO Deidra Merriwether clarified that most benefits were booked in Q2, with minimal impact expected going forward. Jacob Levinson (Melius Research) inquired about the specifics of upcoming pricing actions to address cost pressures. CEO Donald Macpherson explained that September price increases are expected to add about one percentage point annually to top-line growth, helping offset inflation. Ryan Merkel (William Blair) questioned why gross margin, excluding tariff refunds, underperformed expectations. Macpherson attributed this to a higher mix of large, lower-margin projects and some freight headwinds, both of which are expected to moderate. Christopher Glynn (Oppenheimer & Company) sought clarity on the private label shift and its impact on margins. Macpherson said the move to consolidate brands is aimed more at driving incremental growth than margin improvement, with the Grainger brand seeing early traction. Guy Drummond Hardwick (Barclays) asked if large project activity gives more visibility or margin benefits. Macpherson noted that while these projects boost revenue, they mainly dilute gross margins but do not drag down operating margins. In the coming quarters, the StockStory team will be monitoring (1) the effectiveness of September’s pricing actions in offsetting freight and tariff-driven cost increases, (2) the sustainability of project-based sales volumes and their impact on business mix, and (3) the smoothness of the CFO transition as Laurie Thomson steps in. Any shifts in the competitive environment or supplier cost trends will also be closely watched. W.W. Grainger currently trades at $1,297, down from $1,371 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 11 a.m. ET Vice President, Investor Relations - Kyle Bland Chairman and Chief Executive Officer - Donald Macpherson Senior Vice President and Chief Financial Officer - Deidra Merriwether Operator: Greetings, and welcome to the W.W. Grainger Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kyle Bland, Vice President, Investor Relations. Thank you. You may begin. Kyle Bland: Good morning. Welcome to Grainger's Second Quarter 2026 Earnings Call. With me are D.G. Macpherson, Chairman and CEO; and Dee Merriwether, Senior Vice President and CFO. As a reminder, some of our comments today may include forward-looking statements that are subject to various risks and uncertainties. Additional information regarding factors that could cause actual results to differ materially is included in the company's most recent Form 8-K and other periodic reports filed with the SEC. This morning's call includes non-GAAP financial measures, which reflect certain adjustments in previous periods as noted in the presentation. There were no adjusting items in the second quarter of 2026 period. We have also included organic revenue adjustments in the presentation, which normalized sales growth to reflect our exit from the U.K. market, including the Cromwell divestiture and the closure of Zoro U.K., both of which were completed in the fourth quarter 2025. Definitions and full reconciliations of our non-GAAP financial measures with their corresponding GAAP measures are found in the tables at the end of this presentation and in our earnings release, both of which are available on our IR website. We will also share results related to MonotaRO. Please remember that MonotaRO was a public company and follows Japanese GAAP, which differs from U.S. GAAP and is reported in our results 1 month in arrears. As a result, the numbers discussed will differ from MonotaRO's public statements. Now I'll turn it over to D.G. Donald Macpherson: Thanks, Kyle. Good morning, everyone, and thanks for joining today. Building on our momentum from the start of the year, we delivered strong performance in the second quarter by executing well and delivering exceptional service to customers. Despite ongoing uncertainty, sales remain strong in both the High-Touch and Endless Assortment segments, and core operating profitability was in line with expectations. While the external landscape remains fluid. We're confident in our ability to manage the impact or remain committed to our pricing tenets. We also saw continued strength in the demand environment during the period with most end markets showing acceleration. As I spend time with customers, I can see this playing out in the way we serve them on site and inside their operations. Recently, I visited several manufacturing customers where our teams are closely connected to the day-to-day work. We're helping them manage inventory in ways that fit their specific needs, and that is contributing to strong year-over-year growth at these locations. More and more customers are asking us to help them run their operations more efficiently and solve specific challenges, including areas like safety. In one customer, our safety expertise was the catalyst for accelerating that partnership. We're also seeing solid growth from our national accounts in both the U.S. and Canada. On Canada specifically, we have seen tremendous improvement over the past several years as it seems to stay focused on 2 things: serving customers well, and building a stronger, more profitable business. They've made great progress improving service, resetting their sales force, and revamping their website, while also diversifying their customer end markets and product offering. These efforts have driven strong sales growth and operating margin recovery at the highest levels we have seen in nearly a decade. Now turning to our second quarter results. We delivered another quarter of strong growth and profitability. Results benefited from ongoing operational execution across both segments and an improving market, which helped accelerate volume growth in the period. We are pleased with what we are seeing from our High-Touch growth engine and from our efforts within the EA segment to continue propelling the flywheel. Total company reported sales for the quarter were up 10.3% or 13.7% on a daily organic constant currency basis. Operating margin was strong at 16.1%, and diluted EPS finished the quarter up over 20%, inclusive of the impact of IEEPA tariff refunds recognized in the period. Operating cash flow came in at $444 million, which allowed us to return a total of $341 million to Grainger shareholders through dividends and share repurchases. Lastly, we are excited to announce that our new Northwest Distribution Center in Oregon began outbound operations in July. This new technology-enabled building gives us another way to get more of the products customers need closer to where and when they need them. Overall, we're encouraged by the progress we've made across the business. And after a strong first half performance and continued momentum, we are increasing our outlook for the year. With that, I'll turn it over to Dee for a closer look at our financials from the quarter. Deidra Merriwether: Thanks, D.G. Turning to Slide 7. You can see the high-level results we had in the second quarter with total company sales of 10.3% or 13.7% on a daily organic constant currency basis, which included strong growth across High-Touch solutions and Endless Assortment. Gross margin for the quarter was healthy at 39.5%, up 100 basis points versus the prior year period as we saw expansion in both segments and recognized a 90-basis-point tailwind from IEEPA tariff refunds on products directly imported by Grainger. Operating margin was 16.1% up 120 basis points year-over-year as gross margin flow through and leverage Endless Assortment contributed to results. Both gross margin and operating margin benefited from our exit of the U.K. market. If you were to normalize for the tariff refund benefit realized in the period, operating margins were in line with our verbal guide, aided by better-than-expected top line leverage. Overall, results were strong for the quarter, and we delivered diluted EPS of $12.01 which was up over 20% versus the prior year period. Moving to segment level results. The High-Touch Solutions segment delivered sales growth of 11.9% on a reported basis or 11.7% on a daily constant currency basis. Results were driven by strong volume growth and healthy price contribution to revenue and also benefited from some project-based spend. From an end market perspective, MRO market demand continued to improve in the period. For Grainger specifically, we saw a broad-based acceleration across nearly all customer groups with strong contributions from manufacturing and government sectors. This was alongside outsized growth in our contractor and retail end markets, which are both benefiting from data center activities as new facilities are stood up. On profitability. Gross profit margin finished the quarter at 41.8%, up 80 basis points versus the prior year. Results were driven by the benefit from IEEPA tariff refunds and slightly positive mix, although mix came in less favorable than expected on a higher volume of lower-margin products and project-related spend. These impacts were partially offset by private label cost headwinds and unfavorable freight as we absorb the higher costs in the period. Price cost was roughly neutral during the quarter. On SG&A, we delevered slightly year-over-year as strong sales and productivity were offset by continued marketing investment and higher payroll and benefits expense, including higher incentive-based compensation given our strong top line results. Taking all of this together, operating margin for the segment finished at 17.3%, up 70 basis points versus the prior year quarter. All told, we are pleased with the continued strength across the High-Touch segment as we move into the second half of the year. Now focusing on Endless Assortment segment. Sales increased 13.5% on a reported basis or 20.6% on a daily organic constant currency basis, which normalizes for the closure of our Zoro U.K. business, and adjust for an impact of the depreciated Japanese yen. Zoro U.S. was up 18.4% on a daily basis, while MonotaRO achieved 24% growth in local days in local constant currency. At a business level, Zoro saw strong growth from its core B2B customers, along with higher customer retention rates as our marketing program, both targeted and efficiency continued to improve. The team remains focused on delivering our core foundational capabilities to improve the assortment, search experience, pricing, and delivery. At MonotaRO, sales were strong with continued growth from enterprise customers, coupled with solid acquisition and repeat purchase rates with small and midsized businesses. Additionally, MonotaRO benefited from customer prebuying of certain petroleum-related products ahead of anticipated shortages due to the conflict in the Middle East. This behavior has fully subsided and our updated guide reflects slower growth in the back half of the year as this benefit moderates. On profitability, operating margins increased by 160 basis points to 11.5% with favorability across the segment. guide MonotaRO margins were strong at 14% and of 80 basis points and Zoro margins improved to 7.6%, up 180 basis points with both businesses benefiting from healthy top line leverage. Overall, another great quarter for the Endless Assortment team. As we look to the back half of the year, I want to share a brief update on the inflationary environment. We continue to manage the business with the goal of maintaining price cost neutrality over time. With ongoing shifts in the tariff environment, we've had to remain nimble. With this, in the second quarter, we adjusted prices to reflect the changing tariff landscape, including the rollback of IEEPA tariff pricing and offsetting Section 122 tariff impacts. While we made several changes across our assortment, our May pricing actions were net neutral in total. Also in the quarter, we recognized refunds from the federal government for previously paid IEEPA tariff where Grainger was the importer of record. The majority of this benefit was recognized during the second quarter as a reduction to our cost of goods sold with the small remainder expected to flow through over the next couple of quarters. When considering these refunds, it's important to remember that they relate only to tariffs paid directly by Grainger and represent only a small portion of the mini tariff costs that we faced over the last 1.5 years. Importantly, these refund proceeds and the price pass on these SKUs only partially offset the costs we absorbed in 2025 related to IEEPA. Separately, we continue to face inflationary pressures from rising freight and product costs due to the conflict in the Middle East. As these pressures persist, we expect to take additional pricing actions in September to help mitigate this impact. Our September pricing actions will also reflect adjustments related to the recent Section 232 tariff modifications in addition to new Section 301 tariffs, though we anticipate that these tariff-related changes will be minimal. Following our September pricing actions, the majority of known cost increases will have been addressed. And although the situation remains highly fluid, our team continues to stay focused on adhering to our 2 core pricing tenets: To maintain market relevant pricing, and to achieve price cost neutrality over time. Now turning to our guide. We are raising our guidance to reflect the strong sales momentum, along with the impact of tariff refunds. On the top line, this translates to expected daily organic constant currency sales growth between 11.5% and 13% reflecting our second quarter performance and expectations for continued solid MRO market demand in the second half. Our updated operating margin range has increased versus the prior guide to 15.8% to 16.2%. This includes the tariff refund benefit most of which was recognized in the second quarter and improved sales leverage, but is partially offset by anticipated mix headwinds and cost timing pressures as inflation builds ahead of our September pricing round. Lastly, rounding out our guide, you can see EPS is expected to be between $45.50 and $47.25 or up over 17% year-over-year at the midpoint. This represents an improvement of over $1 at the midpoint versus the prior guidance range. We've also updated our supplemental guidance in the appendix, which includes a slight increase in total company operating cash flow at the midpoint compared to the prior guidance. We've continued our strong momentum into the third quarter with preliminary July sales up north of 13% on a daily organic constant currency basis. This start supports our expectations for third quarter sales north of $5 billion or up over 12% on a daily organic constant currency basis, which is 380 basis points lower on a reported basis when normalizing for the U.K. market exit and currency headwinds. We expect operating margins will be down sequentially in the third quarter compared to the second quarter, largely driven by the lap of tariff refunds. With this, we anticipate third quarter operating margins will be in the mid-15% range for the total company. I'll now hand it back over to D.G. for his closing remarks. Donald Macpherson: Thanks, Dee. To wrap things up, we feel good about how the business is operating, and we're confident in our strategy. I'm encouraged by our ability to continue growing profitably in this ever-evolving environment, while staying focused on creating value over the long term. Before I turn it over to Q&A, I want to take a minute to acknowledge the news we shared yesterday that Dee Merriwether has made the personal decision to step down to pursue another opportunity, effective September 4, 2026. On behalf of the company, I want to thank Dee for her many contributions to Grainger. Dee has been a trusted adviser guiding us with deep knowledge and sound judgment during her tenure. With this transition, Laurie Thomson, VP Controller and Principal Accounting Officer, has been appointed interim CFO effective September 5. She will also maintain our existing controllership responsibilities. Laurie brings strong financial expertise and guidance, and I'm confident in her leadership. The transition has no impact on our day-to-day operations and Dee and Laurie will partner on a smooth transition over the next couple of weeks. We will begin a search process for the next CFO immediately. We wish Dee, all the best in the future, and look forward to working with Laurie in the interim. And with that, we'll open it up for Q&A. Operator: [Operator Instructions]. And your first question comes from David Manthey with Baird. David Manthey: Dee, best of luck. First question is on the refunds, of course. One thing you mentioned in the slide deck. I think you said the majority of refunds are reflected in the second quarter, but you didn't say all. So I'm just wondering if there's any kind of estimate you can give us on third quarter and fourth quarter potential refund benefits there, so we can anticipate those? Deidra Merriwether: Yes .again, the vast majority, as we noted would be -- have been accrued for and/or received. And so in the back half, we think it's going to be fairly immaterial based upon that, and it was very hard to estimate from a quarterly perspective. So we focus mostly on what we could estimate and what we felt was probable at this time, and that's what we booked in Q2. David Manthey: Okay. And then thinking about the guidance relative to what you reported this quarter and the benefit from the refund. Could you just talk about -- you mentioned a few of these things. I know we're splitting Adams here. But could you talk about the offsetting factors that caused you to raise full year gross margin by less than the benefit that you got from the second quarter refunds alone? Deidra Merriwether: Sure. You're talking about kind of decomposing the guide a little bit, right, as it relates to gross margins? David Manthey: Yes. Deidra Merriwether: And so -- yes, so if you kind of really just start with where we're at. We noted that the impact in the quarter was about 90 basis points. But if you look at it on a full year basis, the tariff refunds account for, call it, 23 basis points on the year. That was offset by what you hear us talk about higher volume on lower gross margin products or project-based sales that we're incurring with some of our new large customers as we ramp. That offsets that. So that nets to about 15 basis points. And then we see some continued net headwinds as we go through the year, mostly related to fuel and freight, related to the crisis. And then secondly, we do expect to have less of a mix benefit in the second half. So we expect that to have some headwinds. And so that nets that benefit down that we're receiving from the tariff refund. Donald Macpherson: I would just add that I think the mix benefits, oftentimes, we see, if you look historically, when we are in really hot market times, big projects come through. We've seen quite a bit of that actually from customers. And so those tend to be at lower gross margin. They're strong contribution margin. So we expect that to -- that's a big part of the change actually that we're talking about. And so a bit of a drag on gross margin but not on profitability overall. And then the freight, if you thought about how we managed tariffs last year, we didn't increase price immediately. We were patient with customers. We started rating them in September substantially, and we got sort of price cost neutral by January. We're actually price cost neutral in the quarter this time. But that same pattern will play out in September, we'll start to recover some of that headwind we're seeing from freight and Middle East products. Operator: Your next question comes from Jacob Levinson with Melius Research. Jacob Levinson: Dee, best of luck in your new role. I appreciate your help over the last couple of years. Deidra Merriwether: Thank you. Jacob Levinson: Maybe just following up on David's question a little bit. I'm just trying to think about maybe putting a finer point on the pricing actions because I know there's a lot of moving pieces between product prices going up and down, and I'm sure surcharge is in there as well. But can you help us understand where we're going to shake out in the third quarter and into the fourth quarter? Because I'd imagine you're going to be exiting the year at a bit of a higher rate maybe than where we are today. Donald Macpherson: Yes. So Dee talked about the puts and takes of May, and we basically had 0 price change. Overall, for May, we had some ups and downs. What we're doing in September will add about 1 point annually. So less than that, obviously, for the balance of the year, maybe 40 basis points or something like that. And for the whole year, we'll be around 4%. We originally said 3% to 4% at the high end of that given those increases. Jacob Levinson: Okay. That's helpful. And I guess it was just a matter of time before you mentioned data center as a tailwind for you folks, but I'm just trying to get a sense of the materiality of that market over time because I'm sure there's a construction phase. And then after that, you've got those facilities that are going to be around for a long time. So I'm not even sure how you would think about sizing that potential over time. But... Donald Macpherson: Yes. So let me start with. It shows up in maybe strange places if you look at our comps, retail will include data centers because some of those companies actually have retail operations even though the data centers are very retail-esque. Our exposure to direct data centers directly is probably less than 1%. We're seeing obviously strong growth there. But it's having a bigger impact on the ecosystem. I think for everybody, it's probably having a bigger impact because we see it in construction, different types of construction, we maybe see it a little bit in the general strength of manufacturing, hard to quantify, though. So the direct exposure is pretty small, but the exposure overall is probably bigger than that as far as we can tell. Operator: Your next question comes from Ryan Merkel with William Blair. Ryan Merkel: I want to start on gross margin for the quarter. It looks like ex the tariff refund, it was a little bit below what you guys expected. So was the surprise the fuel and the freight and maybe you could quantify what that impact was? And then it also sounds like maybe large projects and mix was the other reason. Donald Macpherson: Yes. I'd say it's more mix actually than freight, but it's a little bit of both. So both of those were the complete driver of that. The other thing is, arguably, we knew the tariff refunds are coming in. We did not want to get aggressive with freight increases. Because that doesn't make sense competitively. So we're holding that purposefully, and we'll make that up as we go through the balance of the year. But mix is the bigger part of it actually with really big projects and product sales. Ryan Merkel: Interesting. Okay. And then SG&A, and I'm focusing on High-Touch, but it didn't lever in the quarter, and it sounds like maybe incentive comp is the main reason there. So that's the first part of the question. And then should you see better SG&A leverage in the second half? It looks like that's implied in the guide, but just want to know how you're thinking about it. Donald Macpherson: Yes. So any year when we get the forecast incorrect and the market is stronger than we expect or we performed better than we expect, we have headwinds in both management bonus and commissions. We also spent more on marketing in the quarter. We're seeing good returns on that. So those are the 3 SG&A elements that were higher than we would have expected at the start of the year. None of them are concerning to be frank. In the back of the year, we expect some moderation in the outsized cost there, and we expect to be more in line. Operator: Your next question comes from Chris Snyder with Morgan Stanley. Christopher Snyder: I was just hoping for maybe a little bit more color on the sequential bridge from Q1 to Q2 just to better understand some of the moving parts. I guess it was down, I guess, maybe like 140 bps sequentially ex -- if we kind of adjust out the tariff refund, if my math is right. So just kind of wondering the seasonality on that mix. I mean, anything you could just help us as we kind of think about the recovery opportunity into the back half? Deidra Merriwether: Yes. As it relates to gross margin specifically, we saw normal seasonality from a gross margin perspective related to price running off. But as we've kind of talked about, we've had some leakage related to fuel costs. So that also was a factor from Q1 gross margin to Q2 as well as additional private label inventory costs -- we've had, as D.G. kind of articulated and as we talked about on the call, a lot of moving pieces as it relates to that. So that was also a negative impact. As you noted, the tariff refunds were not known at the time. And so that was a benefit, but then that was offset by mix. And so that gets us down about 50 basis points Q1 to Q2. Christopher Snyder: I appreciate that. And then just any color, and I don't know if you talked about this when you were talking about some of the Q3 moving parts, but just any color on the Q3 versus Q4 gross margin just as we kind of think through the -- I guess, Q3 is behind on price cost, Q4 catches up. I would imagine some of the mix headwinds get better as the year goes on, just given the hard to predict nature of that. But just kind of -- would appreciate any color on just kind of the back half gross margin. Deidra Merriwether: Yes. As we talked last time, we expect the U-shape to continue with our gross margins. And don't forget, we won't have the tariff impact in Q3 that we have now. And then we'll pick up and have stronger supplier rebates as we end the year. Donald Macpherson: Given the volume. Operator: Your next question comes from Christopher Glynn with Oppenheimer & Company. Christopher Glynn: I was wondering about how the private label headwinds in the cost of goods is phasing here. Is it sort of a steady state from here? I know that there was an adverse bridge from the second -- in the second quarter from the first. Just curious how long that lasts, and if that starts to phase better later in the year? Donald Macpherson: Yes. So it'll still be a headwind. It won't be much different than it was in the first quarter -- first half of the year. It's -- the issue is, of course, to some degree, private brand has been hit by tariffs, but it's also compressed some of the cost. I would say we've launched the Grainger brand, and that has shown good growth. And so we're excited about what we're seeing in terms of private brand going forward with many of our products converting to Grainger branded items. Christopher Glynn: Yes. D.G., could you spend a little bit more a minute -- another minute about that, like what private label brands are being retired? Is this more of a margin play or an incremental growth play? Donald Macpherson: Yes. It's probably more of an incremental growth play to be fair, but we had 14 brands previously that were sort of historical built over decades and decades and decades, I guess. Some of them didn't have customer appeal or even didn't even know that they were Grainger related. And so brands like Dayton will certainly remain, but a lot of the other categories will shift to Grainger and we'll probably end up with 4 or 5 brands at the end of this process, but we're well into that shift at this point. Christopher Glynn: Okay. Great. And what's just the latest on the cadence of supplier price increase announcements? Have those stabilized? Donald Macpherson: Yes. I mean those are consistent, and we'll start to get an idea about what the price requests are for next year now. So that is coming in. So we'll start to have a little more visibility. We won't talk about that until February. But -- but there hasn't been huge changes. There's been certain categories where we've seen significant increases that are kind of Middle East centric in terms of where the raw materials come from. But generally, it's been pretty stable over the last couple of months. Operator: Your next question comes from Deane Dray with RBC Capital Markets. Deane Dray: And I'll add my best wishes to Dee. Deidra Merriwether: Thank you. Donald Macpherson: Thank you. Deane Dray: Can we just circle back on the prebuy impact for Zoro and MonotaRO? Can you size it for us? And to be fair, you flagged this last quarter. So it shouldn't be surprising. Maybe the magnitude might be different. But just how did it play out? And did you see any prebuy elsewhere let's say, in the U.S.? Donald Macpherson: Yes. No, we did not see any prebuy in the U.S. We did not see any prebuy for Zoro. It's all MonotaRO. Given their reliance on the Middle East, there was a run on mostly PPE and natural glove type products, it's roughly $45 million. That was the total magnitude. You never know what the prebuy, how much of that actually plays out going forward. People can continue to buy even after prebuying, you just never know, but that's sort of the rough magnitude. Deane Dray: Good. But were you able to size it? Donald Macpherson: $45 million. Deane Dray: Okay, good. And then the second question, can you expand a bit on the project versus MRO? I mean when we talk to investors, the differentiation for Grainger is you're primarily an MRO-focused model. When and how do the projects come up? Could you ever enter projects in a more deliberate way? And it would end up being a margin drag, we know, but increased volume? And just like what are the dynamics there and how you look at the project opportunity? Donald Macpherson: Yes. So the way it typically plays out is there's a customer that we have a relationship and are actually providing MRO and they have a product project, they will ask for help. And sometimes, we provide that help. Like I mentioned, in times when there's a lot of activity in the market like there is right now, demand is strong and particularly around data centers, we've seen significant projects and project business come through. And so it's been a tailwind on revenue, it's been a headwind on gross margin. That typically doesn't sustain at these levels. I would not say we are going to shift to be a project-focused company. But we do serve customers in a lot of different ways, and we're always doing projects for customers. This year, it's just a bit more given some of the market dynamics. Operator: Your next question comes from Guy Hardwick with Barclays. Guy Drummond Hardwick: I'm wondering if you could maybe expand a little bit more about the impact of large projects. I mean, does that give you more second half visibility on top line? Does it give you some visibility on next year? And if that's the case, is that a headwind to gross margin, but maybe the cost to serve those contracts is less SG&A. So maybe are they neutral to EBITDA margin or enhancing to EBITDA margin or they would still be dilutive? Donald Macpherson: No. Yes. You've got it right. They're dilutive to gross margin, but they're not dilutive to operating margin. Part of the reason we're raising revenue and I think maybe a lot of people are raising revenue targets right now is because of the project spend and just the race to get a lot of data centers up and get the electrical infrastructure built. And so we are certainly seeing a part of that. Like I said, it's not really our focus, but we do support our customers in those efforts. It will be a tailwind from revenue for the remainder of this year, and I would argue maybe further than that, given the cycle that this is going to take. Guy Drummond Hardwick: And Deidra, just it looks like the full year guidance implies maybe a 6% increase in SG&A, which kind of implies maybe 5% growth in the second half. How -- what are the kind of the risks to achieving that 5%? I know you have an easy comparative to Q4 because you have some unusual health care expenses. But maybe you could expand a little bit on the dynamics of the second half OpEx trends? Deidra Merriwether: I would say there's 2 things that we feel really comfortable with the guide, one of which you noted. The other one, as you recall, we also had some slowdown in government business last year. And so we don't expect that because of the shutdown. We don't expect that to happen again this year or have no view of that in our guide. And so that will also help us from a leverage perspective. Operator: [Operator Instructions] Your next question comes from Chris Dankert with D.A. Davidson. Christopher Dankert: I guess the point of clarification, Dee, and apologies if I missed it. But on the third quarter guidance from a top line perspective, can you just give us a sense for how July was trending preliminary basis versus that growth rate? Deidra Merriwether: Yes. We kind of noted on the call that we expect July to be up 13% and then on the quarter, be up around 12%. Some of that is normal seasonality as we flow through a particular quarter on the top line basis, but we expect Q3 still continue our strong performance, and that's on a daily constant currency basis, the numbers that I just provided to you. Christopher Dankert: Perfect. I appreciate it. And then just on -- if we could move to Zoro, the SKU optimization that we did about a year ago now, I noticed the SKU count is kind of drifting back up. Are we making -- or continuing to prune at the same time? Are we trying to keep that assortment optimized? Or is this kind of just creep? Maybe just kind of give us some color on the SKU count over at Zoro. Donald Macpherson: Yes. So a lot of the SKU pruning was around items that just never sold and weren't going to sell, and that were not really core to what we're trying to do. We are in a constant pruning period now. We're growing SKU count, not nearly as fast as we had planned in the past, but we expect it to continue to grow for the next couple of years, but just more modestly. Operator: Your next question comes from Tommy Moll with Stephens. Thomas Moll: D.G. I wanted to ask about some of the September pricing specifically around freight and fuel. Should we think of this as part of the regular cadence of negotiations you have with customers? Or are these surcharges that may require some kind of force majeure discussion here? Donald Macpherson: These are mostly going to be normal course discussions, price increases with our customers, it's not going to be a force majeure. Thomas Moll: Okay. And then on the competitive environment and share. Noted, we're not going to split hairs on how many bps of share in any given quarter. But I did just want to circle back in light of some of the strong top line performance. Any anecdotes or update you could give us on how you think your share is trending, how the competitive marketplace has been, particularly on the High-Touch side? Donald Macpherson: Yes. I mean we think that we've gotten benefit on the top line from pricing from the market demand and share gain. And we think, all of those have been reasonably strong. Year-to-date, we would expect that to continue through the balance of the year. The market has turned from negative for several years to clearly positive and maybe low single digits, but maybe not so low single digits now. But it's almost like you're in -- you're trying to figure out where the puck is moving. But certainly, it has gotten stronger as the year has gone on. Operator: Thank you. And our next question comes from Connor Cerniglia with Bernstein. Connor Cerniglia: Great. Earlier in the call, you mentioned that the IEEPA tariff was a small impact, I guess, on the total tariff costs you've experienced. Is that more of a hint that you could see more refunds in the future beyond the $43 million you mentioned this quarter, and I guess, the next 2 quarters? I know it's probably pretty difficult to size, but do you expect more refunds from IEEPA going forward? Donald Macpherson: No. No. We think that was more just a point to make the point that the overall tariff increases were much larger than that, that we've taken. So it's a small portion of the total that we took. But we don't think there's going to be a lot more refunds. Connor Cerniglia: Okay. Helpful. And I guess, switching back to data center large capital projects. Have you all tried to attempt to size the contribution from a volume perspective from these large projects? Is it too small to size it? Or kind of any color or refining points on the actual contribution to volumes for data centers could be helpful. Donald Macpherson: Yes. I mean, we think the project spend this year has been increased our growth rate about 90 basis points. High-Touch, not for the company, but for High-Touch, we don't see project spend. So yes, that's the sizing of it at this point. And like I said, we always look at overall profitability on those projects. We want to make sure it's profitable. So that's sort of looking at a net margin perspective and they generally are. Operator: And there are no further questions at this time. So I'll hand the floor back to D.G. Macpherson for closing remarks. Donald Macpherson: All right. Thank you. I appreciate everybody being on the call. I'll just reiterate, we think that we are taking the right actions and making the right moves to continue to grow, gain share, grow profitably. There's always puts and takes in the external environment that generally we try to focus on the long term. We continue to invest in creating better solutions for customers, and that's going to be our focus. And I'd like to thank Dee, once again for her time and wish her luck. And I hope everybody has a great rest of the summer. Thank you. Operator: Thank you. This concludes today's call. All parties may disconnect. Have a good day. Before you buy stock in W.W. Grainger, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and W.W. Grainger wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* Now, it’s worth noting Stock Advisor’s total average return is 965% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 11, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Grainger (GWW) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in W.W. Grainger, Inc.? Here are five stocks we like better. Strong second-quarter performance: Sales increased 10.3%, while daily organic constant-currency growth reached 13.7%. Operating margin rose to 16.1% and diluted EPS climbed more than 20% to $12.01, helped partly by tariff refunds. Outlook raised: Grainger now expects full-year daily organic constant-currency sales growth of 11.5% to 13%, operating margin of 15.8% to 16.2% and EPS of $45.50 to $47.25. Management also anticipates roughly 4% pricing contribution for the year. CFO transition announced: CFO Dee Merriwether will depart on Sept. 4, with Laurie Thomson serving as interim CFO while Grainger searches for a permanent replacement. The company said the transition is not expected to disrupt operations. 3 Industrial Stocks That Just Crushed Earnings W.W. Grainger (NYSE:GWW) reported second-quarter 2026 sales growth and higher profitability, citing broad-based demand improvement, operational execution and tariff refunds, while raising its full-year outlook. Chairman and CEO D.G. Macpherson said sales remained strong in both the company’s High-Touch Solutions and Endless Assortment segments despite what he described as an uncertain external environment. He said most end markets accelerated during the quarter, with particular strength in manufacturing, government, contractors and retail customers. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control The Hidden Value in Genuine Parts Company’s Spin-Off Plan “More and more customers are asking us to help them run their operations more efficiently and solve specific challenges,” Macpherson said, pointing to inventory-management and safety-related services as contributors to customer growth. Grainger reported total sales growth of 10.3% for the quarter, or 13.7% on a daily organic constant-currency basis. Operating margin was 16.1%, up 120 basis points from the prior-year quarter, while diluted earnings per share rose more than 20% to $12.01. → 3 Drone Stocks That Should Soar After the Summer Slump Fastenal : Growth Trends, Challenges & Key Investment Insights Operating cash flow totaled $444 million, enabling the company to return $341 million to shareholders through dividends and share repurchases. Senior Vice President and CFO Dee Merriwether said gross margin reached 39.5%, an increase of 100 basis points from a year earlier. Results included a 90-basis-point benefit from refunds of tariffs paid under the International Emergency Economic Powers Act, or IEEPA, on products directly imported by Grainger. → Why Rare Earth Processing Could Be the Real 2027 Opportunity Merriwether said the company recognized the majority of those refunds during the second quarter as a reduction in cost of goods sold. Grainger expects the remaining benefit over the second half of the year to be immaterial. The company said the refunds, including associated price actions, only partially offset IEEPA-related costs it absorbed in 2025. High-Touch Solutions sales increased 11.9% on a reported basis and 11.7% on a daily constant-currency basis. The segment’s operating margin rose 70 basis points to 17.3%. The segment benefited from volume gains, pricing and some project-related spending. However, Merriwether said a higher volume of lower-margin products and project sales created less favorable mix than management had expected. Higher freight costs and private-label inventory costs also weighed on margins, while price-cost was approximately neutral during the quarter. Macpherson said project activity, including work associated with data-center construction and related infrastructure, has supported revenue growth but has reduced gross margin. He said such business is not dilutive to operating margin because it generally carries favorable contribution economics. Grainger estimates that project spending added about 90 basis points to High-Touch growth this year. Macpherson said direct data-center exposure represents less than 1% of the company’s business, though the broader data-center buildout is contributing to demand in construction, manufacturing and other customer markets. Endless Assortment sales rose 13.5% on a reported basis, or 20.6% on a daily organic constant-currency basis after adjusting for the closure of Zoro U.K. and currency movements. Zoro U.S. posted daily sales growth of 18.4%, while MonotaRO grew 24% in local days and local currency. Endless Assortment operating margin increased 160 basis points to 11.5%. MonotaRO’s margin rose 80 basis points to 14%, and Zoro’s margin improved 180 basis points to 7.6%, with both businesses benefiting from top-line leverage. MonotaRO also benefited from customer pre-buying of petroleum-related products, particularly personal protective equipment and nitrile gloves, ahead of anticipated shortages connected to conflict in the Middle East. Macpherson said the pre-buying totaled roughly $45 million and has fully subsided. Grainger’s updated outlook incorporates slower MonotaRO growth in the back half as that benefit moderates. Management said it adjusted prices during the second quarter to reflect the rollback of IEEPA tariff pricing and the effects of Section 232 tariffs. The company’s May pricing actions were net neutral overall. Grainger expects to take further pricing actions in September to address rising freight and product costs tied to the Middle East conflict, along with recent Section 232 modifications and new Section 301 tariffs. Macpherson said the actions will be normal-course price discussions with customers rather than force majeure-related surcharges. The September actions are expected to add about one percentage point to annualized pricing, according to Macpherson. He said full-year price contribution is now expected to be around 4%, at the high end of the company’s prior 3% to 4% expectation. Grainger raised its outlook for daily organic constant-currency sales growth to a range of 11.5% to 13%. It now expects full-year operating margin of 15.8% to 16.2% and earnings per share of $45.50 to $47.25, representing an increase of more than $1 at the midpoint from prior guidance. Preliminary July sales rose more than 13% on a daily organic constant-currency basis. The company expects third-quarter sales of more than $5 billion, with daily organic constant-currency growth above 12%. Third-quarter operating margin is expected in the mid-15% range, down sequentially as the company laps the second-quarter tariff-refund benefit. Macpherson also said Merriwether will step down effective Sept. 4 to pursue another opportunity. Laurie Thomson, Grainger’s vice president, controller and principal accounting officer, will become interim CFO effective Sept. 5 while retaining her controllership responsibilities. The company said it will begin a search for a permanent CFO immediately and that the transition is not expected to affect day-to-day operations. W.W. Grainger, Inc (NYSE: GWW) is an industrial supply distributor founded in 1927 and headquartered in Lake Forest, Illinois. The company supplies maintenance, repair and operations (MRO) products and services to businesses, institutions and government customers. Over its long history Grainger has developed a broad product assortment and a national distribution network that supports operations across a range of end markets, including manufacturing, healthcare, hospitality, transportation and public sector organizations. Grainger's product portfolio spans core categories such as electrical and lighting, safety and personal protective equipment, material handling, motors and power transmission, plumbing and HVAC, fasteners and adhesives, hand and power tools, and janitorial and facility supplies. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "W.W. Grainger Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

W.W. Grainger, Inc. GWW has reported second-quarter 2026 earnings of $12.01 per share, up 20.5% year over year. The figure beat the Zacks Consensus Estimate of $11.28 by 6.47%, aided by strong sales growth, and wider gross and operating margins.Quarterly sales increased 10.3% year over year to $5.02 billion and surpassed the consensus estimate of $4.95 billion by 1.35%. Daily sales advanced 10.3%, reflecting solid momentum across both operating segments. We predicted daily sales to increase 8.5%. On a daily, organic constant currency basis, sales increased 13.7%. The comparison adjusts for foreign currency movements and the company’s exit from the U.K. market, including the divested Cromwell business and closed Zoro U.K. operations. W.W. Grainger, Inc. price-consensus-eps-surprise-chart | W.W. Grainger, Inc. Quote The High-Touch Solutions N.A. segment’s daily sales rose 11.9% year over year in the second quarter of 2026, reflecting strong volume growth and a healthy contribution from pricing. Our model predicted year-over-year organic daily sales growth of 7.4%. The Endless Assortment segment’s daily sales grew 13.5% year over year in the quarter, supported by strong performances at MonotaRO and Zoro. Our model predicted organic daily sales growth of 12.2% for the quarter. Gross profit increased 13% year over year to $1.98 billion. The gross margin expanded 100 basis points to 39.5%, supported by improvement in both segments and benefits related to the U.K. market exit.The quarter included $43 million in refunds on IEEPA tariffs for products directly imported by Grainger. These refunds reduced the cost of goods sold and provided a roughly 90-basis-point benefit to the gross margin. The cost of sales came in at $3.04 billion, 8.5% year over year.Selling, general and administrative expenses rose 9.3% to $1.18 billion. Grainger’s operating earnings in the quarter increased 19% year over year to $807 million. The operating margin came in at 16.1% compared with 14.9% in the prior-year quarter. The company had cash and cash equivalents of $589 million as of June 30, 2026, compared with $585 million at the end of 2025. The cash flow from operating activities was $1.18 billion in the first six months of 2026 compared with $1.02 billion in the prior-year period.Long-term debt was $2.41 billion as of June 30, 2026, compared with $2.36 billion as of Dec. 31, 2025. Grainger returned $341 million to shareholders through dividends and share repurchases during the quarter. Grainger raised its 2026 net sales guidance to $19.4-$19.7 billion from $19.2-$19.6 billion. The company expects reported sales growth of 8.4-10% from the prior mentioned 6.7-9.1%.  The adjusted earnings guidance was increased to $45.50-$47.25 per share from $44.25-$46.25. Grainger also raised its operating margin outlook to 15.8-16.2% and the gross margin forecast to 39.3-39.6%. The updated outlook reflects strong first-half execution, improving MRO market demand and better top-line leverage. In the past year, GWW shares have gained 47.4% compared with the industry’s growth of 8%. Image Source: Zacks Investment Research The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. MSC Industrial Direct Company, Inc. MSM reported adjusted earnings per share of $1.43 for the third quarter of fiscal 2026, beating the Zacks Consensus Estimate of $1.28 by 11.72%. The bottom line increased 32.4% from the year-ago quarter’s adjusted earnings of $1.08 per share.MSC Industrial’s net sales were $1.05 billion, surpassing the consensus estimate of $1.03 billion by 1.74%. Sales increased 7.8% year over year, driven by stronger average daily sales, price benefits and a return to volume growth. Average daily sales increased 7.8% year over year and came in above the company’s quarterly outlook.SiteOne Landscape Supply, Inc. SITE delivered second-quarter earnings of $3.14 per share, missing the Zacks Consensus Estimate of $3.36. SITE posted earnings of $2.86 in the year-ago quarter.SiteOne Landscape posted sales of $1.53 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate of $1.54 billion. The company posted sales of $1.46 billion in the year-ago quarter. Hudson Technologies, Inc. HDSN is anticipated to release second-quarter 2026 results on Aug. 5.The Zacks Consensus Estimate for Hudson’s earnings per share is pegged at 17 cents for the second quarter, implying a decline of 26% from the year-ago reported figure. The consensus estimate for Hudson Industrial’s total sales is pinned at $73.7 million, indicating a year-over-year increase of 1.1%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report MSC Industrial Direct Company, Inc. (MSM) : Free Stock Analysis Report Hudson Technologies, Inc. (HDSN) : Free Stock Analysis Report SiteOne Landscape Supply, Inc. (SITE) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was driven by broad-based acceleration across nearly all customer groups, with specific strength in manufacturing, government, and data center-related sectors. The High-Touch segment benefited from strong volume growth and healthy price contribution, alongside an uptick in project-based spend from large customers. Management attributed the 100-basis-point gross margin expansion primarily to IEEPA tariff refunds and the strategic exit from the U.K. market. Endless Assortment growth was propelled by improved B2B customer retention at Zoro and enterprise customer expansion at MonotaRO. Operational efficiency was bolstered by the launch of the new technology-enabled Northwest Distribution Center in Oregon to improve localized product availability. Management noted that while project-based sales are dilutive to gross margin, they remain accretive to operating margin and reflect deep customer integration. The company maintained its commitment to price-cost neutrality, successfully navigating a fluid tariff landscape through nimble pricing adjustments. Full-year guidance was raised to reflect strong first-half sales momentum and the impact of recognized tariff refunds. Management expects continued solid MRO market demand in the second half, supported by preliminary July sales growth exceeding 13%. Operating margins are projected to decline sequentially in Q3 as the company laps the one-time tariff refund benefit recognized in Q2. Additional pricing actions are planned for September to mitigate rising freight and product costs stemming from Middle East conflicts. The outlook assumes a moderation in MonotaRO's growth as the benefit from petroleum-related product prebuying fully subsides. Recognized a 90-basis-point gross margin tailwind from IEEPA tariff refunds where Grainger was the importer of record. CFO Deidra Merriwether will step down effective September 4, 2026, with Laurie Thomson appointed as interim CFO. The company completed its exit from the U.K. market, including the Cromwell divestiture and Zoro U.K. closure, which improved overall margin profiles. Incentive-based compensation and marketing investments led to slight SG&A deleverage despite strong top-line results. The vast majority of refunds were accrued or received in Q2; any remaining flow-through in the back half is expected to be immaterial. Management clarified that these refunds only partially offset the total costs absorbed in 2025 related to the IEEPA tariffs. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Direct exposure to data centers is less than 1%, but the sector is driving significant growth in the broader ecosystem, including contractor and retail end markets. Project-based spend related to data centers and electrical infrastructure added approximately 90 basis points to High-Touch growth. Excluding tariff refunds, gross margin faced pressure from a higher volume of lower-margin project sales and rising fuel/freight costs. Management expects a 'U-shaped' margin profile for the year, with Q4 benefiting from stronger supplier rebates due to high volumes. Grainger is consolidating its private label portfolio from 14 historical brands down to 4 or 5 core brands, including the flagship Grainger brand. The shift is viewed primarily as an incremental growth play to improve customer appeal and brand recognition. Planned September price increases will add about 1 point annually to address freight and Middle East-related product cost inflation. Management expects to be at the high end of their original 3% to 4% full-year price contribution target.

Continued strong results across the business;Company increases full year 2026 outlook Second Quarter Highlights Delivered sales of $5.0 billion, up 10.3%, or 13.7% on a daily, organic constant currency basis Achieved operating margin of 16.1%, up 120 basis points, inclusive of IEEPA tariff refunds Generated diluted EPS of $12.01, up 20.5% Produced $444 million in operating cash flow and returned $341 million to Grainger shareholders through dividends and share repurchases Increasing full year 2026 guidance, including diluted adjusted EPS range of $45.50 to $47.25 CHICAGO, Aug. 4, 2026 /PRNewswire/ -- Grainger (NYSE: GWW) today reported results for the second quarter of 2026 with sales of $5.0 billion, up 10.3%, or 13.7% on a daily, organic constant currency basis, and diluted EPS of $12.01, up 20.5% compared to the second quarter of 2025. "Despite ongoing geopolitical uncertainty, we executed well during the second quarter and delivered exceptional service to customers. Sales remained strong and core operating profitability was in line with expectations," said D.G. Macpherson, Chairman and CEO. "Looking ahead, we are increasing our outlook to reflect our strong first half performance and the continued momentum we are seeing across the demand environment." 2026 Second Quarter Financial Summary RevenueSales in the quarter increased 10.3% compared to the second quarter of 2025. When normalizing for the Company's exit from the U.K. market and the impact of foreign currency exchange, sales on a daily, organic constant currency basis increased 13.7% compared to the second quarter of 2025. In the High-Touch Solutions - N.A. segment, sales were up 11.9%, or 11.7% on a daily, constant currency basis compared to the second quarter of 2025. Results for the segment were driven by volume growth and price inflation as tariff costs are passed. In the Endless Assortment segment, sales were up 13.5% compared to the second quarter of 2025, or up 20.6% on a daily, organic constant currency basis. Growth for the segment was driven by strong performance at both MonotaRO and Zoro. Gross Profit MarginGross profit margin was 39.5% in the second quarter of 2026, up 100 basis points compared to the second quarter of 2025, driven by strength from both segments and a benefit related to the Company's exit from the U.K. market. Results were inclusive of refunds recognized on IEEPA tariffs for products directly imported by Grainger, which reduced cost of goods sold by $43 million. In the High-Touch Solutions - N.A. segment, gross profit margin was 41.8%, up 80 basis points compared to the prior year quarter as the benefit from the IEEPA tariff refunds and positive mix were partly offset by unfavorable freight and headwinds from certain private label products. In the Endless Assortment segment, gross profit margin increased by 90 basis points from the second quarter of 2025 due to improvement across the segment. EarningsFor the second quarter of 2026, total Company operating earnings were $807 million, up 19.0% compared to the second quarter of 2025. Operating margin was 16.1%, a 120 basis point increase compared to the second quarter of 2025. This increase in operating margin was driven by gross margin improvement in both segments, sales leverage improvement in Endless Assortment, and a benefit related to the Company's exit from the U.K. market. Diluted earnings per share for the second quarter of 2026 were $12.01, up 20.5% compared to the second quarter of 2025. The increase was due primarily to strong operating performance and fewer shares outstanding, partly offset by a higher effective tax rate. Tax RateFor the second quarter of 2026, the effective tax rate was 24.8%, compared to 23.2% in the second quarter of 2025. The increase in the effective tax rate was primarily due to decreased tax credit activity in the current year period and the impact of tax legislation effective in 2026. Cash FlowDuring the second quarter of 2026, the Company generated $444 million of cash flow from operating activities as net earnings were partly offset by unfavorable working capital. The Company invested $111 million in capital expenditures, resulting in free cash flow of $333 million. During the quarter, the Company returned $341 million to Grainger shareholders through dividends and share repurchases. GuidanceThe Company is updating the following guidance ranges for 2026: WebcastThe Company will conduct a live conference call and webcast at 11:00 a.m. ET on Tuesday, August 4, 2026, to discuss the second quarter results. The event will be hosted by D.G. Macpherson, Chairman and CEO, and Deidra Merriwether, Senior Vice President and CFO, and can be accessed at invest.grainger.com. To access the conference call via phone, please send a request to [email protected]. For those unable to participate in the live event, a webcast replay will be available for 90 days at invest.grainger.com. About GraingerW.W. Grainger, Inc., is a leading broad line distributor with operations primarily in North America and Japan. At Grainger, We Keep the World Working® by serving more than 4.6 million customers worldwide with maintenance, repair and operating (MRO) products and value-added solutions delivered through innovative technology and deep customer expertise. Known for its commitment to service and purpose-driven culture, the Company reported 2025 revenue of $17.9 billion. For more information, visit www.grainger.com. Visit invest.grainger.com to view information about the Company, including a supplement regarding 2026 second quarter results and additional Company information. Safe Harbor StatementAll statements in this communication, other than those relating to historical facts, are "forward-looking statements" under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as "anticipate," "estimate," "believe," "expect," "could," "forecast," "may," "intend," "plan," "predict," "project," "will," or "would," and similar terms and phrases, including references to assumptions. Grainger cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to risks and uncertainties, many of which are beyond Grainger's control, which could cause Grainger's results to differ materially from those that are presented. Forward-looking statements include, but are not limited to, statements about future strategic plans and future financial and operating results. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third-party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives, acquisitions or business strategies including with respect to Grainger's eCommerce platforms and artificial intelligence; failure to adequately protect our intellectual property or successfully defend against infringement claims; fluctuations or declines in Grainger's gross profit margin; Grainger's responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters, including new or revised provisions relating to contract compliance or performance; the impact of any government shutdown; disruption or breaches of information technology or data security systems involving Grainger or third parties on which Grainger depends; general industry, economic, market or political conditions; general global economic conditions, including existing, new, or increased tariffs, trade issues and changes in trade policies, inflation, and interest rates; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger's common stock; an incident that adversely impacts Grainger's reputation or brand; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; effects of outbreaks of pandemic disease or viral contagions, global conflicts, natural or human-induced disasters, extreme weather, and other catastrophes or conditions; effects of climate change; failure to execute on our corporate responsibility efforts; competition for, or failure to attract, retain, train, motivate and develop executives and key team members; loss of key members of management or key team members; loss of operational flexibility and potential for work stoppages or slowdowns if team members unionize or join a collective bargaining arrangement; changes in effective tax rates; changes in credit ratings or outlook; Grainger's incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments and other factors that can be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. Forward-looking statements are given only as of the date of this communication and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Contacts: SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAPFINANCIAL MEASURES (Unaudited) The Company supplements the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with the non-GAAP financial measures as defined below. The Company believes these non-GAAP financial measures provide meaningful information to assist investors in understanding financial results and assessing future performance as they provide a better baseline for analyzing the ongoing performance of its business by excluding items that may not be indicative of core operating results. Basis of presentationThe Company has a controlling ownership interest in MonotaRO, which is part of the Endless Assortment segment. MonotaRO's results are fully consolidated, reflected in U.S. GAAP, and reported one-month in arrears. Results will differ from MonotaRO's externally reported financials which follow Japanese GAAP. Adjusted gross profit, adjusted SG&A, adjusted operating earnings, adjusted operating margin, adjusted net earnings, adjusted diluted EPSExclude certain non-recurring items, like restructuring charges, asset impairments, gains and losses associated with business divestitures or closures and other non-recurring, infrequent or unusual gains and losses (together referred to as "non-GAAP adjustments"), from the Company's most directly comparable reported U.S. GAAP figures (reported gross profit, SG&A, operating earnings, net earnings and EPS). The Company believes these non-GAAP adjustments provide meaningful information to assist investors in understanding financial results and assessing future performance as they provide a better baseline for analyzing the ongoing performance of its business by excluding items that may not be indicative of core operating results. Free cash flow (FCF) Calculated using total cash provided by operating activities less capital expenditures. The Company believes the presentation of FCF allows investors to evaluate the capacity of the Company's operations to generate free cash flow. Daily sales Refers to sales for the period divided by the number of U.S. selling days for the period. Daily, constant currency salesRefers to daily sales adjusted for changes in foreign currency exchange rates. Daily, organic constant currency salesRefers to daily sales excluding the sales of certain divested or closed businesses in the comparable prior year period post date of divestiture or closure and changes in foreign currency exchange rates. Foreign currency exchangeCalculated by dividing current period local currency daily sales by current period average exchange rate and subtracting the current period local currency daily sales divided by the prior period average exchange rate. U.S. selling days:2025: Q1-63, Q2-64, Q3-64, Q4-64, FY-2552026: Q1-63, Q2-64, Q3-64, Q4-64, FY-2552027: Q1-63, Q2-64, Q3-64, Q4-63, FY-254 As non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies' non-GAAP measures having the same or similar names. These non-GAAP measures should not be considered in isolation or as a substitute for reported results. These non-GAAP measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. This press release also includes certain non-GAAP forward-looking information. The Company believes that a quantitative reconciliation of such forward-looking information to the most comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of future restructurings, asset impairments, and other charges. Neither of these forward-looking measures, nor their probable significance, can be quantified with a reasonable degree of accuracy. Accordingly, a reconciliation of the most directly comparable forward-looking GAAP measures is not provided. The reconciliations provided below reconcile GAAP financial measures to non-GAAP financial measures used in this release: daily sales; daily, organic constant currency sales; and free cash flow. View original content:https://www.prnewswire.com/news-releases/grainger-reports-results-for-the-second-quarter-2026-302841639.html

This article first appeared on GuruFocus. Total Company Sales: Up 10.3% on a reported basis, or 13.7% on a daily organic constant currency basis. Gross Margin: 39.5%, up 100 basis points year-over-year, including a 90 basis point tailwind from IEEPA tariff refunds. Operating Margin: 16.1%, up 120 basis points year-over-year. Diluted EPS: $12.01, up over 20% versus the prior year period. Operating Cash Flow: $444 million in the quarter. Capital Returns: Returned $341 million to shareholders through dividends and share repurchases. High-Touch Solutions Sales: Up 11.9% on a reported basis, or 11.7% on a daily constant currency basis. High-Touch Gross Profit Margin: 41.8%, up 80 basis points versus the prior year. High-Touch Operating Margin: 17.3%, up 70 basis points year-over-year. Endless Assortment Sales: Up 13.5% on a reported basis, or 20.6% on a daily organic constant currency basis. Zoro U.S. Sales: Up 18.4% on a daily basis. MonotaRO Sales: Achieved 24% growth in local days and local constant currency. Endless Assortment Operating Margin: 11.5%, up 160 basis points. MonotaRO Operating Margin: 14%, up 80 basis points. Zoro Operating Margin: 7.6%, up 180 basis points. Guidance: Raising full-year guidance to daily organic constant currency sales growth between 11.5% and 13%, operating margin of 15.8% to 16.2%, and EPS between $45.50 and $47.25. Warning! GuruFocus has detected 2 Warning Signs with FRA:CIG. Is GWW fairly valued? Test your thesis with our free DCF calculator. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Strong sales growth of 10.3% reported and 13.7% daily organic constant currency, with broad-based acceleration across most end markets. Operating margin expanded 120 basis points year-over-year to 16.1%, driven by gross margin flow-through and leverage in Endless Assortment. Diluted EPS grew over 20% to $12.01, benefiting from IEEPA tariff refunds and strong operational execution. Endless Assortment segment delivered robust growth, with Zoro U.S. up 18.4% and MonotaRO up 24% in local currency, supported by improved customer retention and enterprise growth. Company raised full-year guidance for sales, operating margin, and EPS, reflecting strong momentum and confidence in the back half. New Northwest distribution center in Oregon began operations, enhancing capacity and service capabilities. Canada business showed significant improvement, with sales growth and operating margins reaching near-decade highs. July sales trended up over 13% daily organic constant currency, indicating continued strong demand into Q3. Gross margin in High-Touch was impacted by higher volume of lower-margin products and project-based spend, leading to less favorable mix than expected. SG&A deleveraged slightly in High-Touch due to increased marketing investment and higher incentive-based compensation from strong top-line results. Ongoing inflationary pressures from rising freight and product costs due to the Middle East conflict, requiring additional pricing actions in September. MonotaRO experienced customer pre-buying of petroleum-related products ahead of anticipated shortages, which has subsided and is expected to moderate growth in the back half. Private label cost headwinds and unfavorable freight costs partially offset gross margin benefits in the quarter. CFO Dee Merriweather announced her departure, creating leadership transition uncertainty despite interim appointment. Third-quarter operating margins are expected to decline sequentially due to the lap of tariff refunds, with margins in the mid-15% range. Q: Can you provide more color on the impact of large projects on the business, and does this provide more visibility on top-line for the second half and into next year? Are these projects dilutive to operating margin?A: D.G. Macpherson (Chairman and CEO) explained that large projects, particularly around data centers, have been a tailwind on revenue but a headwind on gross margin. He clarified that while these projects are dilutive to gross margin, they are not dilutive to operating margin. The project spend has increased the High-Touch segment's growth rate by about 90 basis points this year. He expects this to remain a tailwind for revenue for the remainder of the year and potentially beyond, given the cycle of building out data centers and electrical infrastructure. Q: Regarding the IEEPA tariff refunds, can you estimate the potential refund benefits for the third and fourth quarters? Also, could you decompose the guidance and explain the offsetting factors that caused you to raise the full-year gross margin by less than the benefit from the second-quarter refunds alone?A: Dee Merriweather (CFO) stated that the vast majority of refunds were accrued for and received in the second quarter, with the back-half impact expected to be immaterial. On the guidance, she noted that tariff refunds account for about 23 basis points on the full year, which is offset by higher volume on lower gross margin products or project-based sales, netting to about 15 basis points. Continued headwinds from fuel and freight costs related to the Middle East crisis and less mix benefit in the second half further offset the benefit. D.G. Macpherson added that big projects tend to have strong contribution margins, so while they drag on gross margin, they don't hurt overall profitability. Q: Can you help us understand where pricing will shake out in the third quarter and into the first quarter, given the various pricing actions and surcharges?A: D.G. Macpherson explained that the May pricing actions were net neutral overall. The September pricing actions will add about one point annually, or roughly 40 basis points for the balance of the year. For the full year, pricing is expected to be around 4%, at the high end of the original 3% to 4% guidance. He noted that the company was patient with customers on tariff-related price increases last year, and the same pattern will play out in September to recover headwinds from freight and Middle East product costs. Q: Can you size the pre-buy impact for Zoro and MonotaRO, and did you see any pre-buy elsewhere, such as in the U.S.?A: D.G. Macpherson confirmed there was no pre-buy in the U.S. or at Zoro. At MonotaRO, given its reliance on the Middle East, there was a run on TPU, nitrile gloves, and related products, totaling roughly $45 million. He noted that it's difficult to know how much of the pre-buy actually plays out going forward, as customers may continue to buy even after pre-buying. Q: On gross margin for the quarter, excluding the tariff refund, it came in a bit below expectations. Was the surprise fuel and freight, and can you quantify the impact? Also, should we expect better SG&A leverage in the second half?A: D.G. Macpherson stated that the miss was more mix-related than freight, though both were drivers. The company purposely held back on aggressive price increases despite knowing tariff refunds were coming, for competitive reasons. On SG&A, he noted that higher-than-expected performance led to headwinds in management bonuses, commissions, and marketing spend. He expects moderation in these outsized costs in the back half of the year, leading to more in-line leverage. Q: Can you provide color on the sequential bridge from first quarter to second quarter gross margin, and what are the expectations for the back half?A: Dee Merriweather explained that gross margin saw normal seasonality from price running off, but was also impacted by fuel cost leakage and additional private label inventory costs. The tariff refunds were a benefit but were offset by mix, resulting in a decline of about 50 basis points from Q1 to Q2. She expects the U-shape pattern to continue, with no tariff impact in Q3 and stronger supplier rebates as the year ends. Q: How is the private label headwind in cost of goods phasing, and can you expand on the Grainger brand launch? Is this more of a margin play or an incremental growth play?A: D.G. Macpherson said private label will continue to be a headwind, similar to the first half of the year, due to tariffs and compressed costs. He noted the launch of the Grainger brand has shown good growth, with many products converting to Grainger branded items. He described it as more of an incremental growth play, consolidating from 14 legacy brands down to four or five, with brands like Dayton remaining while others shift to the Grainger brand. Q: On the September pricing actions around freight and fuel, should we think of this as part of the regular cadence of negotiations with customers, or are these surcharges that may require force majeure discussions?A: D.G. Macpherson clarified that these will be normal course price increase discussions with customers, not force majeure events. He also noted that supplier price increase announcements have been stable over the last couple of months, with some significant increases in categories that are Middle East-centric in terms of raw materials. Q: Can you provide any color on how you think your share is trending and how the competitive marketplace has been, particularly on the High-Touch side?A: D.G. Macpherson stated that the company has benefited from pricing, market demand, and share gains, all of which have been reasonably strong. He noted the MRO market has turned from negative for several years to clearly positive, possibly in the low single-digits or higher. He expects this to continue through the balance of the year. Q: You mentioned the IEEPA tariff was a small impact on total tariff costs. Do you expect more refunds from IEEPA going forward? Also, can you size the contribution of data center projects to volumes?A: D.G. Macpherson clarified that the comment was to emphasize that overall tariff increases were much larger than the refunds received, and he does not expect a lot more refunds. On data centers, he noted direct exposure is less than 1%, but the project spend has For the complete transcript of the earnings call, please refer to the full earnings call transcript.