Contract wins lifted sales 15.5% in the September quarter. At $52 the stock already pays 37 times my $1.42 of 2027 earnings, so twelve months look like a market return.
Key points
- $2.46 billion September-quarter sales, up 15.5% year over year, with daily sales at large sites up 28%.
- 21.5% operating margin, up 90 basis points, after 20 basis points of timing help in gross margin.
- $1.42 is my 2027 earnings; $52.02 is 37 times that figure.
The call
The shares need about $1.41 of 2027 earnings at 37 times to sit at $52. That math assumes 10% sales growth after this year's 14% lift and an operating margin that holds near 21%.
I model $10.3 billion of 2027 sales and 21.1% operating margin, which is $1.42 a share. The same 37 times multiple is $53. Mix still cuts gross margin, September daily sales cooled versus July and August, and that is why I do not pay more.
Revenue by quarter ($ billions)Company reports through Q3 2026; Q4 2026E–Q4 2027E are my estimates
Valuation
| Item | Figure |
|---|
| 2026 sales (my estimate) | $9.32 billion |
| 2027 sales (my estimate) | $10.3 billion |
| 2027 operating margin | 21.1% |
| 2027 earnings | $1.42 a share |
| Multiple | 37 times |
| 12-month target | $53 |
The multiple matches a high-return distributor that still compounds mid-teens on capital. Being right on growth and wrong on the multiple is a few dollars either way; a stall in industrial orders would cut more. Dividend of about $1.04 a year is extra, not in the $53.
Operating margin by quarterCompany reports through Q3 2026; my 2027 run-rate 21.1%
Risks
- Larger-customer mix keeps cutting gross margin faster than SG&A can offset.
- Industrial new orders or manufacturing output roll over after the 55 ISM reading.
- Price/cost and fuel stay a 30-basis-point drag into 2027.
What would change my mind
A fourth-quarter daily-sales print back above 16% with operating margin holding 21.5% without timing items would support a higher multiple.