Graco (GGG) AI Stock Analysis

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Graco

(NYSE:GGG)

Rating:74Outperform

Price Target:―

Graco's strong financial performance is the primary driver of its stock score, with robust profitability and efficient cash flow generation. However, technical indicators suggest potential resistance, and the valuation appears relatively high, which may limit upside potential. The earnings call highlighted both growth and operational challenges, adding a layer of complexity to the overall outlook.

Positive Factors

Financial Management

Graco has strong free cash flow and a proven ability to opportunistically repurchase shares.

Initiatives

The early benefits of the OneGraco initiative are being realized.

Market Strategy

Graco continues to drive market outgrowth through share and price.

Negative Factors

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.

Trade Policies

Proposed trade policies with China could negatively impact full-year revenue by 1% to 2%.

Graco (GGG) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$13.98B

Dividend Yield1.27%

Average Volume (3M)880.34K

Price to Earnings (P/E)29.5

Beta (1Y)0.86

Revenue Growth-0.40%

EPS Growth-2.50%

CountryUS

Employees4,300

SectorIndustrials

Sector Strength92

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)0.70

Shares Outstanding167,132,860

10 Day Avg. Volume727,988

30 Day Avg. Volume880,343

Financial Highlights & Ratios

PEG Ratio84.42

Price to Book (P/B)5.79

Price to Sales (P/S)0.00

P/FCF Ratio25.39

Enterprise Value/Market Cap0.96

Enterprise Value/Revenue1.57

Enterprise Value/Gross Profit11.84

Enterprise Value/Ebitda5.49

Forecast

1Y Price Target

$90.67

Price Target Upside8.41% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering5

Graco Business Overview & Revenue Model

Company DescriptionGraco Inc. designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide. The company's Industrial segment offers proportioning systems to spray polyurethane foam and polyurea coatings; equipment that pumps, meters, mixes and dispenses sealant, adhesive, and composite materials; and gel-coat equipment, chop and wet-out systems, resin transfer molding systems and applicators, and precision dispensing solutions. It also provides liquid finishing equipment; paint circulating and supply pumps; paint circulating advanced control systems; plural component coating proportioners; spare parts and accessories; and powder finishing products to coat powder finishing on metals under the Gema and SAT brands. The company's Process segment offers pumps to move and dispense chemicals, water, wastewater, petroleum, food, lubricants, and other fluids; pressure valves used in the oil and natural gas industry, other industrial processes, and research facilities; and chemical injection pumping solutions for injection of chemicals into producing oil wells and pipelines. It also supplies pumps, hose reels, meters, valves, and accessories for fast oil change facilities, service garages, fleet service centers, automobile dealerships, auto parts stores, truck builders, and heavy equipment service centers; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators in industrial and commercial equipment, compressors, turbines, and on- and off-road vehicles. The company's Contractor segment offers sprayers to apply paint to walls and other structures; and viscous coatings to roofs, as well as markings on roads, parking lots, athletic fields, and floors. It sells its products through distributors, original equipment manufacturers, and home center channels; and directly to end-users. The company was incorporated in 1926 and is headquartered in Minneapolis, Minnesota.

How the Company Makes MoneyGraco Inc. generates revenue primarily through the sale of its wide range of fluid handling equipment and systems. The company operates globally, with its revenue streams divided into three main segments: Industrial, Process, and Contractor. The Industrial segment provides solutions for industries like automotive, aerospace, and electronics, focusing on precision fluid dispensing and finishing. The Process segment serves markets such as oil and natural gas, chemical manufacturing, and food and beverage, offering pumps, meters, and related accessories. The Contractor segment targets the construction and home improvement industries, providing spray equipment for painting, coating, and texture applications. Graco also benefits from strong distribution networks and strategic partnerships that enhance its market reach and customer base. Additionally, after-sales services, including parts and maintenance, contribute to the company's earnings.

Graco Financial Statement Overview

Summary

Graco maintains a robust financial position with strong profitability, prudent balance sheet management, and efficient cash flow generation. The company's performance is marked by stable revenue growth, high margins, and low financial leverage, positioning it well for sustained growth and stability in the Industrial - Machinery sector.

Income Statement

Very Positive

Graco exhibits strong profitability with a consistent Gross Profit Margin around 52-53% over the periods. The Net Profit Margin for TTM is approximately 22.7%, indicating healthy operational efficiency. Revenue growth is stable, with slight fluctuations due to industry cyclicality, but overall showing a positive trend. EBIT and EBITDA margins are robust, indicating effective cost management and operational leverage.

Balance Sheet

Positive

The company's balance sheet is solid, with a low Debt-to-Equity Ratio, demonstrating prudent financial management and low leverage risk. The Return on Equity (ROE) is strong, reflecting effective use of equity capital. The Equity Ratio indicates a strong equity base, ensuring financial stability and flexibility in operations.

Cash Flow

Positive

Graco's cash flow generation is strong, with a positive trend in Free Cash Flow Growth, demonstrating effective capital management. The Operating Cash Flow to Net Income ratio indicates good cash conversion efficiency. Free Cash Flow to Net Income ratio remains healthy, supporting reinvestment and shareholder returns.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.15B	2.11B	2.20B	2.14B	1.99B	1.65B
	Gross Profit
1.13B	1.12B	1.16B	1.06B	1.03B	854.94M
	EBIT
581.11M	570.10M	646.84M	572.70M	531.32M	391.72M
	EBITDA
662.24M	678.86M	686.59M	641.62M	578.00M	440.43M
	Net Income Common Stockholders
487.98M	486.08M	506.51M	460.64M	439.87M	330.46M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
622.73M	675.34M	537.95M	339.20M	624.30M	378.91M
	Total Assets
2.79B	3.14B	2.72B	2.44B	2.44B	1.99B
	Total Debt
46.96M	40.81M	50.06M	117.03M	217.02M	201.41M
	Net Debt
-575.77M	-634.52M	-487.89M	-222.16M	-407.29M	-177.50M
	Total Liabilities
451.18M	555.08M	497.78M	579.25M	733.86M	704.22M
	Stockholders Equity
2.34B	2.58B	2.22B	1.86B	1.71B	1.28B
Cash Flow		Free Cash Flow
548.05M	514.96M	466.24M	176.23M	323.33M	322.70M
	Operating Cash Flow
628.19M	621.70M	651.02M	377.39M	456.90M	394.04M
	Investing Cash Flow
-321.68M	-342.81M	-185.27M	-226.82M	-153.30M	-99.04M
	Financing Cash Flow
-396.08M	-139.86M	-268.01M	-434.40M	-57.14M	-139.47M

Graco Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price83.64

Price Trends

50DMA

82.01

Positive

100DMA

83.24

Positive

200DMA

83.84

Negative

Market Momentum

MACD

1.10

Positive

RSI

50.30

Neutral

STOCH

15.96

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GGG, the sentiment is Neutral. The current price of 83.64 is below the 20-day moving average (MA) of 83.96, above the 50-day MA of 82.01, and below the 200-day MA of 83.84, indicating a neutral trend. The MACD of 1.10 indicates Positive momentum. The RSI at 50.30 is Neutral, neither overbought nor oversold. The STOCH value of 15.96 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ITT	82 Outperform	$11.60B	23.45	19.27%	0.89%	6.99%	23.25%
PNR	78 Outperform	$15.92B	24.96	18.59%	0.99%	-0.42%	3.23%
IEX	75 Outperform	$13.57B	28.45	12.73%	1.54%	1.66%	-17.18%
GGG	74 Outperform	$13.98B	29.51	20.28%	1.27%	-0.40%	-2.50%
NDSN	71 Outperform	$11.01B	24.62	16.15%	1.56%	0.78%	-8.42%
RRX	68 Neutral	$8.91B	38.28	3.69%	1.04%	-10.19%	―
Sector *	64 Neutral	$4.39B	11.81	5.20%	249.39%	3.96%	-12.36%

* Industrials Sector Average

Performance Comparison

GGG

Graco

83.64

5.11

6.51%

IEX

IDEX

179.60

-28.78

-13.81%

ITT

147.35

15.29

11.58%

NDSN

Nordson

193.38

-37.76

-16.34%

PNR

Pentair

96.79

18.68

23.91%

RRX

Regal Rexnord

134.38

-10.24

-7.08%

Graco Earnings Call Summary

Earnings Call Date:Apr 23, 2025

(Q1-2025)

% Change Since: 5.91%|

Next Earnings Date:Jul 23, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed view with notable achievements in sales growth and cash flow, but faced challenges in the contractor segment and gross margin due to acquisitions and external factors like tariffs in China. The company is actively working on mitigation strategies and has shown strong financial management through share repurchase activities.

Q1-2025 Updates

Positive Updates

Sales Growth and Revenue Achievement

Graco reported first-quarter sales of $528 million, an increase of 7% from the first quarter of last year. Excluding acquisitions, sales grew 3% for the quarter.

Strong Financial Performance

Reported net earnings increased 2% to $124 million or $0.72 per diluted share. Adjusted non-GAAP net earnings were $120 million or $0.70 per diluted share, an increase of 8%.

Robust Cash Flow

Cash provided by operations totaled $125 million, an increase of $6 million from last year. Cash provided by operations as a percent of adjusted net earnings was 104%.

Successful Share Repurchases

The company repurchased 4.4 million shares for nearly $360 million year-to-date.

Positive Segment Performance

Industrial segment sales increased 5% with growth in all regions. Sales in the expansion markets segments increased by 12% with positive momentum in the semiconductor market.

Corab Acquisition Success

Corab has met expectations as integration efforts continue, contributing 6% to sales growth.

Negative Updates

Contractor Segment Decline

Contractor segment sales declined 1% due to continued softness in the home center business and challenging EMEA construction markets.

Gross Margin Pressure

The gross margin rate decreased 150 basis points in the quarter, with acquisitions accounting for 100 basis points of the decline.

Currency Translation Impact

The effect of currency translation reduced sales by 2%.

Challenges in China Market

China accounted for nearly 6% of global revenue and faces impact from tariffs. Mitigation plans include qualifying additional suppliers and moving component manufacturing to US factories.

Company Guidance

In the first quarter of fiscal year 2025, Graco Inc. reported sales of $528 million, marking a 7% increase from the previous year. Excluding acquisitions, which contributed 6% growth, organic sales grew by 3%, although currency translation reduced sales by 2%. Net earnings increased by 2% to $124 million or $0.72 per diluted share, with adjusted non-GAAP net earnings at $120 million or $0.70 per diluted share, an increase of 8%. The gross margin rate decreased by 150 basis points due to higher product costs and lower factory volume, with acquisitions accounting for nearly 100 basis points of this decline. Operating earnings rose by $11 million or 8%, maintaining an operating margin of 27% of sales. Contractor segment operating margin fell by five percentage points to 24%, impacted by the acquisition of Corab and lower factory volume. Despite these challenges, cash provided by operations increased to $125 million, with significant investments in share repurchases, dividends, and capital expenditures. Looking forward, Graco anticipates low single-digit growth on an organic constant currency basis for the full year, with capital expenditures projected between $50 million to $60 million.

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.