UPDATE: Citi Raising Price Target on W.W. Grainger

Citi Investment Research is out with a research report on W.W. Grainger, Inc. (NYSE: GWW) and it is raising its price target to $143 from $136, and it has a Sell rating on shares.

In a note to clients, Citi Investment Research writes, "Grainger put up a high quality quarter, with 8pp of organic growth including 3pp of price pointing to stable short-cycle U.S. industrial conditions. A clean 3Q11 EPS of $2.51 beat our $2.25 estimate and consensus, and guidance was raised by 35c at the midpoint, taking the new range to $8.80-$9.00. The beat was driven by record-high U.S. branch-based operating margins, nearly 100bps above prior peak margins achieved at 1Q11. The stock reacted positively to the news, outperforming the sector by 400bps and nearly retracing its underperformance over the past three weeks. Our Sell thesis remains predicated on valuation appearing extended on nearly all metrics and not on execution. We believe the "flight to quality" strategy fueling the shares should eventually run its course as investors get a better read on 2012 and risk appetites normalize. No doubt this sentiment shift depends on some degree of clarity on the European debt situation and more confidence in the US economy."

Shares of GWW gained $11.21 yesterday to close at $166.30, a gain of 7.23%.