The WW Grainger Inc. (GWW) 4.45% senior notes due 10/1/2035 are rated A2 with a Positive outlook by Moody’s and A+ with a Stable outlook by Standard & Poor’s. These securities are recommended for low-risk, tax-deferred portfolios. Interest payments are taxed as ordinary income, writes Martin Fridson, editor of Forbes/Fridson Income Securities Investor.
This issue trades over the counter and can be bought or sold using the issue’s CUSIP number 384802AF1. At 99.07 recently, it had a 4.49% current yield and a 4.56% yield to maturity. That price compares with a 52-week high of $100.181. The notes are acceptable for purchase at $103.75 or lower.
WW Grainger is a worldwide distributor of industrial and safety supplies. It operates in two business segments, High-Touch Solutions (HTS) and Endless Assortment (EA), its online service. HTS caters to mid-size and large customers, offering approximately two million maintenance, repair, and operating products and services. The company’s product mix includes Safety and Security, Material Handling and Storage, Pumps, Plumbing and Test Equipment, Cleaning and Maintenance, and more.
In raising its outlook from Stable to Positive in February 2025, Moody’s highlighted Grainger’s strong business profile and atypically high operating margin for a distribution company. The rating agency also noted the company’s strong free cash flow generation and low financial leverage.
An additional positive cited by Moody’s was Grainger’s leading position within the fragmented market for industrial maintenance, repair, and operating (MRO) supplies. Also, said the rating agency, the company has a reputation for superior order fulfillment, complemented by its broad product offering and diverse customers and end markets.
Moody’s further commented that it expected that Grainger would maintain its conservative financial policy, thereby keeping its debt/EBITDA below 1.5 times during periods of weak demand or macroeconomic pressures that might be brought about by tariffs. Grainger’s ability to navigate through trade conflicts, said Moody’s, is enhanced by pricing leverage, initiatives in productivity and efficiency, a sizable supplier base, and management’s exploration of alternative sourcing for certain products.
In addition, profit margins, cash flow, and other credit metrics during rough periods were likely to remain at levels that would support a credit upgrade. In the most recently reported quarter, Grainger’s sales modestly exceeded analysts’ expectations.
Recommended Action: Buy GWW’s 4.45% senior notes due 10/1/2035.
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