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Graco Inc (GGG)
:GGG
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Graco
(NYSE:GGG)
68Neutral
Positive Factors
Capacity Expansion
GGG is in the very early stages of absorbing/optimizing its recent capacity expansions with meaningful room for future volume growth.
Manufacturing Excellence
The tour highlighted a best-in-class industrial across its manufacturing automation, streamlined product development, vertical integration, and operational excellence efforts.
Operational Structure
GGG is integrating its regional teams into divisions and creating a global, customer-centric operating structure in order to drive growth.
Negative Factors
Earnings Growth
Earnings growth is a struggle for GGG in 2025, with the potential inflection point in the second half.
Earnings Performance
3Q earnings fell below expectations on downside from both revenue and margins.
Market Demand
Softening of NA demand through the quarter, and broad-based green shoots remain elusive amid broad-based weakness and overcapacity in key markets.
Graco (GGG) vs. S&P 500 (SPY)
Market Cap
$14.22B
Dividend Yield1.24%
Average Volume (3M)831.28K
Price to Earnings (P/E)29.8
Beta (1Y)0.88
Revenue Growth-3.75%
EPS Growth-4.27%
CountryUS
Employees4,300
SectorIndustrials
Sector Strength72
IndustryIndustrial Goods
Share Statistics
EPS (TTM)2.82
Shares Outstanding169,493,970
10 Day Avg. Volume873,494
30 Day Avg. Volume831,278
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)6.73
Price to Cash Flow (P/CF)19.20
P/FCF Ratio19.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$102.00Price Target Upside21.59% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
Graco Business Overview & Revenue Model
Company DescriptionGraco, Inc. is a manufacturing company, which designs, manufactures and markets systems and equipment used to move, measure, control, dispense and spray fluid and powder materials. It operates through the following segments: Industrial, Contractor and Process. The Industrial segment includes the Applied Fluid Technologies, Industrial Products and Process divisions. It markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil & natural gas, water, wastewater, petroleum, food, lubricants and other fluids. The Contractor segment equipment includes sprayers that apply texture to walls and ceilings, highly viscous coatings to roofs and markings on roads, parking lots, athletic fields and floors. Graco was founded by Russell Gray and Leil Gray in April 1926 and is headquartered in Minneapolis, MN.
How the Company Makes MoneyGraco makes money primarily through the sale of its fluid handling equipment and systems, which are used across various industrial applications. The company's revenue streams are driven by its three main segments: Industrial, Process, and Contractor. The Industrial segment supplies systems and equipment for finishing, spray painting, and coating applications. The Process segment provides solutions for the management of fluids in industrial processes, including sanitary, oil and gas, and chemical applications. The Contractor segment serves the construction and home improvement industries with products such as airless sprayers and texture applicators. Graco's earnings are bolstered by its strong global distribution network, strategic acquisitions, and continuous investment in research and development to innovate and meet the evolving needs of its customer base.
Graco Financial Statement Overview
Summary
Graco's financials show strong profitability with a robust gross profit margin and effective cost management. The balance sheet is stable with low leverage, and cash flow is healthy, indicating effective cash management. However, revenue growth is modest, and there's room for improvement in return on equity.Income Statement
Graco has demonstrated strong profitability with a consistent gross profit margin averaging above 50% over the past years. The net profit margin has remained robust, showcasing effective cost management. However, revenue growth has been relatively modest, indicating a need for more aggressive expansion strategies.85
Very Positive
Balance Sheet
The company maintains a solid equity base with a low debt-to-equity ratio, indicating financial stability and low leverage risk. The equity ratio is strong, reflecting a solid capital structure. However, the return on equity, while positive, indicates room for improvement in generating income from shareholders' equity.78
Positive
Cash Flow
Graco has shown a healthy operating cash flow to net income ratio, indicating effective cash management. Free cash flow is positive, with consistent growth over the years, enhancing financial flexibility. While free cash flow growth has been positive, the rate of increase suggests potential for further optimization in cash flow management.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.11B | 2.20B | 2.14B | 1.99B | 1.65B | Gross Profit |
| 1.12B | 1.16B | 1.06B | 1.03B | 854.94M | EBIT |
| 570.10M | 646.84M | 572.70M | 531.32M | 391.72M | EBITDA |
| 570.10M | 686.59M | 641.62M | 578.00M | 440.43M | Net Income Common Stockholders |
| 486.08M | 506.51M | 460.64M | 439.87M | 330.46M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 675.34M | 537.95M | 339.20M | 624.30M | 378.91M | Total Assets |
| 3.14B | 2.72B | 2.44B | 2.44B | 1.99B | Total Debt |
| 40.81M | 50.06M | 117.03M | 217.02M | 201.41M | Net Debt |
| -634.52M | -487.89M | -222.16M | -407.29M | -177.50M | Total Liabilities |
| 555.08M | 497.78M | 579.25M | 733.86M | 704.22M | Stockholders Equity |
| 2.58B | 2.22B | 1.86B | 1.71B | 1.28B |
| Cash Flow | Free Cash Flow | |||
| 514.96M | 466.24M | 176.23M | 323.33M | 322.70M | Operating Cash Flow |
| 621.70M | 651.02M | 377.39M | 456.90M | 394.04M | Investing Cash Flow |
| -342.81M | -185.27M | -226.82M | -153.30M | -99.04M | Financing Cash Flow |
| -139.86M | -268.01M | -434.40M | -57.14M | -139.47M |
Graco Technical Analysis
Negative
83.89
Price Trends
84.77
Negative
85.69
Negative
83.51
Positive
Market Momentum
-0.29
Positive
44.82
Neutral
16.42
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GGG, the sentiment is Negative. The current price of 83.89 is below the 20-day moving average (MA) of 85.78, below the 50-day MA of 84.77, and above the 200-day MA of 83.51, indicating a neutral trend. The MACD of -0.29 indicates Positive momentum. The RSI at 44.82 is Neutral, neither overbought nor oversold. The STOCH value of 16.42 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GGG.
Graco Risk Analysis
Graco disclosed 23 risk factors in its most recent earnings report. Graco reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Graco Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $10.98B | 21.42 | 19.60% | 0.95% | 10.59% | 27.04% | |
77 Outperform | $24.86B | 9.31 | 24.30% | 1.13% | -2.99% | 159.26% | |
73 Outperform | $14.19B | 23.00 | 18.45% | 1.09% | -0.53% | 0.13% | |
68 Neutral | $14.22B | 29.75 | 20.22% | 1.24% | -3.75% | -4.27% | |
66 Neutral | $10.69B | 23.38 | 35.36% | 1.51% | -4.23% | -13.42% | |
63 Neutral | $9.59B | 18.43 | 28.63% | 1.97% | -0.90% | -1.69% | |
62 Neutral | $8.21B | 13.22 | 1.05% | 3.07% | 3.77% | -16.87% |
* Industrials Sector Average
Performance Comparison
GGG
Graco
83.89
-7.01
-7.71%
DOV
Dover
181.14
8.59
4.98%
ITT
ITT
134.92
9.61
7.67%
LECO
Lincoln Electric Holdings
190.50
-54.90
-22.37%
PNR
Pentair
86.08
6.28
7.87%
AOS
A. O. Smith Corporation
66.85
-17.55
-20.79%
Graco Earnings Call Summary
Earnings Call Date: Jan 27, 2025 | % Change Since: -2.40% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strategic steps and restructuring efforts aimed at future growth, including the acquisition of Corob and a new organizational structure. However, these positives were tempered by notable declines in sales and earnings, increased expenses, and challenges across key segments and markets.Highlights
Acquisition of Corob and Integration Activities
Graco closed the acquisition of Corob in November, which contributed 3% revenue growth in the fourth quarter. The integration is underway and initial results have met expectations, suggesting potential for future growth.
Protective Coatings Growth
Growth in protective coatings was observed across all regions, driven by infrastructure investments, increases in the container market, and sectors such as rail, marine, and fireproofing.
Strong Cash Flow and Financial Flexibility
Cash provided by operations totaled $622 million for the year, maintaining strong cash flow and a balance sheet that provides financial flexibility for future investments.
Restructuring for Future Growth
Graco implemented a global customer-centric operating structure, resulting in a nonrecurring reorganization charge of $8 million in the fourth quarter, with estimated annual savings of $16 million.
Lowlights
Decline in Fourth Quarter Sales and Earnings
Fourth quarter sales decreased by 3% year-over-year, and net earnings decreased by 1%. Adjusted non-GAAP net earnings decreased by 20% due to sales volume declines and increased expenses.
Contractor Segment Challenges
The Contractor segment saw a decline of 3% for the quarter and 1% for the year, attributed to softness in the U.S. housing and remodeling markets.
Industrial Segment Revenue Decline
Industrial segment revenue declined 13% for the quarter and 6% for the full year, particularly impacted by weakness in China and the sealants and adhesive products market.
Increased Operating Expenses
Total operating expenses increased by $19 million or 15% in the quarter, driven by business reorganization costs, expenses from acquired operations, and litigation costs.
Company Guidance
During Graco's Fourth Quarter Conference Call for 2024, the company provided an extensive overview of its financial performance and future expectations. Fourth quarter sales were reported at $549 million, a 3% decrease from the previous year, with acquisitions contributing 3% growth, while excluding acquisitions, sales decreased by 6%. The net earnings stood at $109 million, or $0.63 per diluted share, reflecting a 1% decrease. Operating expenses rose by $19 million or 15%, mainly due to $7 million in business reorganization costs and $7 million in litigation costs, among other factors. The company expects various impacts on its 2025 financials, including a projected unfavorable impact of 1% on net sales and 2% on net earnings due to foreign currency movements. Graco anticipates capital expenditures to be between $50 million and $60 million, following the completion of expansion projects. The company also highlighted a move to a global customer-centric operating structure, expected to yield annual savings of approximately $16 million. Looking ahead, Graco is initiating a full-year outlook for 2025, projecting low single-digit sales growth on an organic constant currency basis.Graco Corporate Events
M&A TransactionsBusiness Operations and Strategy
Graco Completes Strategic Acquisition of Corob S.p.A.
Positive
Nov 8, 2024
Graco Inc. has completed its acquisition of Corob S.p.A., a global leader in dispensing and mixing solutions for paints and coatings, for €230 million plus potential additional payments. This strategic move enhances Graco’s presence in the growing paint and coating equipment sector. Corob’s technology and expertise will be leveraged to benefit new and existing customers, expanding Graco’s global manufacturing reach. The acquisition aligns with Graco’s goal of driving growth and innovation in fluid and coatings management.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.