Financial Analysis: Rexnord (RXN) vs. W.W. Grainger (GWW)

Rexnord (NYSE: RXN) and W.W. Grainger (NYSE:GWW) are both mid-cap industrial products companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, profitability, earnings, dividends and valuation.

Dividends

W.W. Grainger pays an annual dividend of $5.12 per share and has a dividend yield of 2.2%. Rexnord does not pay a dividend. W.W. Grainger pays out 60.7% of its earnings in the form of a dividend. W.W. Grainger has raised its dividend for 45 consecutive years.

Valuation & Earnings

This table compares Rexnord and W.W. Grainger’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rexnord $1.92 billion 1.40 $74.10 million $0.66 39.06
W.W. Grainger $10.14 billion 1.32 $605.92 million $8.43 27.86

W.W. Grainger has higher revenue and earnings than Rexnord. W.W. Grainger is trading at a lower price-to-earnings ratio than Rexnord, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Rexnord and W.W. Grainger, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rexnord 0 1 2 0 2.67
W.W. Grainger 4 11 1 0 1.81

Rexnord currently has a consensus target price of $27.00, indicating a potential upside of 4.73%. W.W. Grainger has a consensus target price of $190.92, indicating a potential downside of 18.70%. Given Rexnord’s stronger consensus rating and higher possible upside, analysts clearly believe Rexnord is more favorable than W.W. Grainger.

Institutional & Insider Ownership

85.0% of W.W. Grainger shares are held by institutional investors. 3.5% of Rexnord shares are held by insiders. Comparatively, 9.6% of W.W. Grainger shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Risk & Volatility

Rexnord has a beta of 1.65, meaning that its stock price is 65% more volatile than the S&P 500. Comparatively, W.W. Grainger has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500.

Profitability

This table compares Rexnord and W.W. Grainger’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rexnord 4.45% 12.03% 3.70%
W.W. Grainger 4.83% 34.25% 11.20%

Summary

W.W. Grainger beats Rexnord on 10 of the 17 factors compared between the two stocks.

About Rexnord

Rexnord Corporation is a multi-platform industrial company. The Company operates through two segments: Process & Motion Control platform, and Water Management platform. The Process & Motion Control platform designs, manufactures, markets and services a range of engineered mechanical components used within systems. The Process & Motion Control portfolio includes motion control products, shaft management products, aerospace components and related value-added services. Its Process & Motion Control brands include Rexnord, Rex, Euroflex, Falk, FlatTop, Link-Belt, Thomas and Tollok. The Water Management platform designs, procures and markets products that provide and enhance water quality, safety, flow control and conservation. The Water Management product portfolio includes professional grade water control and safety, water distribution and drainage, finish plumbing and site works products. Its products are marketed and sold under various brand names, including Zurn, Wilkins and VAG.

About W.W. Grainger

W.W. Grainger, Inc. (Grainger) is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. The Company operates through two segments, which include the United States and Canada. The Company’s business support functions provide coordination and guidance in the areas of accounting and finance, business development, communications and investor relations, compensation and benefits, information systems, health and safety, global supply chain functions, human resources, risk management, internal audit, legal, real estate, security, tax and treasury. The Company’s other businesses also include Zoro Tools, Inc. (Zoro), the single channel online business in the United States, MonotaRO Co. (MonotaRO) in Japan, and operations in Europe, Asia and Latin America.

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