Grainger's upgraded guidance fails to impress The Street, despite continued strong earnings

Grainger released strong second quarter figures today with 8% revenue growth and a 12% increase in net earnings. In addition Grainger raised their 2007 EPS forecast from $4.70-$4.85 to $4.75-$4.90. Grainger's failure to raise the low end of their EPS forecast caused the stock to crash 4.18% today - which I believe has created an excellent buying opportunity for a stock which should reach $115 by year end.

Grainger's press release detailed progress toward the companies market expansion - with many of the expansion cities experiencing 10-12% growth year over year. The press release also noted that Mexican sales rose 26% with U.S. sales rising 8% (5% related to market expansion efforts and 3% organic growth). 8% revenue growth domestically is impressive and points to good execution of their marketing expansion and underlying strength in the US economy. Historically Grainger's sales have been tied to the health of the U.S. economy but these results reflect the potential for Grainger to grow the business through improved branch locations, targeted advertising and greater cost control. It will be interesting to see if Grainger's numbers will be able to weather any future dips in the ISM Manufacturing Index during the next year or if their sales will continue to move in lock-step with the index.