Grainger Shapes Cup with Handle

August 15, 2012 /

The chart ofW.W. Grainger ( GWW ) is showing positive price and volume action. The stock is forming a cup-with-handle base with a 211.46 potential buy point.

The stock’s base is a second-stage pattern. It reset its base count about a year ago by breaching the low of a prior pattern. Grainger then cleared a cup base in September and went on to carve a stellar uptrend until it started consolidating in late March.

Grainger’s handle formed in well-below-average volume, which is a positive.

The stock has logged a number of accumulation weeks or up weeks in big volume in recent months. It hasn’t see any signs of heavy selling for two months.

In terms of institutional sponsorship, 1,068 domestic mutual funds owned the stock at the end of the second quarter, up from 947 funds three months earlier.

Lake Forest, Ill.-based W.W. Grainger sells everything from adhesives and fasteners to janitorial supplies and plumbing equipment.

UnlikeHome Depot ( HD ) orLowe’s ( LOW ), Grainger caters to maintenance professionals.

The company does business in 157 countries. Grainger has a five-year earnings growth rate of 15%. It sports a five-year Earnings Stability of 9, signaling a steady stream of income.

The company has posted double-digit earnings and sales gains for the past 10 quarters.

Last month, the company beat expectations with Q2 profit that rose 18% to $2.63 a share. Sales grew 12% to $2.249 billion, below views. But Grainger lifted its full-year earnings guidance.

Grainger is a member of the S&P 500 Dividend Aristocrats index, which tracks the performance of blue chip companies that have increased their shareholder payouts for at least 25 consecutive years. The industrial supplier has lifted its payout for 41 years.

In April, Grainger raised its quarterly dividend by 21% to 80 cents a share. The company pays $3.20 a share on an annualized basis. That works out to a dividend yield of about 1.5%.

IBD calculates a dividend growth rate of 17% for Grainger.


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