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Why W.W. Grainger Shares Popped More Than 12% Today

What happened 

Shares of W.W. Grainger Inc. (NYSE: GWW) jumped in trading Tuesday after the industrial supply company reported third-quarter results. After a rapid rise that moderated briefly late in the morning, shares continued to climb, notching a gain of 12.1% as of 2:32 p.m. EDT.

So what

Sales for the quarter were up 2% to $2.64 billion, but the period had one fewer day than in 2016, so daily sales rose 3%. Net income fell 13% to $162 million, and earnings per share dropped 9% to $2.79.

Results like those won't wow growth investors, but they did top analysts' estimates of $2.63 billion in revenue and $2.57 per share in earnings. On top of those Q3 beats, management said it expects full-year earnings to be in the range of $10.40 to $10.90 per share, above analysts' consensus estimate of $10.37.

Now what

Sometimes beating expectations is enough to send a stock shooting higher. Investors had clearly lowered their expectations for Grainger to the point where even a big drop in profits impressed them.

The stock's performance in the future will be defined by improvement in Canada and the U.S. business now that it has completed the divestiture of a non-core specialty business. We may be seeing some signs of improvement in the core business, but I'd like to see more consistency before getting too bullish on the stock.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.