US Electrical Equipment & Multi-Industry "EE/MI Morning Note - Call toda..."

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US Electrical Equipment & Multi-Industry "EE/MI Morning Note - Call toda..."

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compensation increases as well as higher marketing expenses. This should come

down in the second half due to lower marketing expenses.

Our US MRO Distributor price monitor shows GWW price stabilizing in April and

May, at a rate similar rate to the first quarter (> Access Dataset). This suggests price

changes in May have been largely net neutral, in line with management's prior

expectations. Overall this would indicate price benefits in 2Q'26 trending similar to

5% in 1Q. We expect price contribution to decline gradually in the second half of

the year on tougher comps, with 4%-5% for the full year 2026. We note that

while our price monitor has been directionally in line with actual pricing for

Grainger, it has deviated in magnitude due to mix impact. We think this deviation

in magnitude is likely to continue in the near future (link).

GTES preview- We expect 2Q results to support our view of GTES as a beneficiary of

the ongoing (though still modest) cyclical recovery. Our sense is that demand trends are

a bit better than when GTES initially provided 2026 guidance earlier this year, and that

full-year organic sales are tracking above the midpoint of 2.5% (which consensus

models; UBS estimate is 3%). In addition to organic sales, we also see upside to

expectations for 2H profitability, in particular consensus forecasts for a $39 million

increase in EBITDA from 1H. We see potential upside from non-repeat of 1H headwinds,

restructuring benefits, and earnings on higher 2H revenues. Net, we think that demand

is moving in the right direction, and could see positive revisions to 2H earnings

expectations which should be positive for shares. GTES trades at a low 15.5x NTM P/E, a