Graco (GGG) Shares Increase 2.7% Since Q3 Earnings Release
Graco Inc.’s GGG third-quarter 2023 adjusted earnings of 76 cents per share beat the Zacks Consensus Estimate of adjusted earnings of 73 cents per share. The bottom line improved 16.7% year over year due to solid momentum in the Industrial and Process segments. Shares of the company have increased 2.7% since the earnings release on Oct 25.
However, GGG’s net sales of $539.7 million underperformed the consensus estimate of $559 million. The top line decreased 1.1% year over year.
On a regional basis, quarterly sales generated from the Americas were flat year over year. In Europe, the Middle East and Africa region, sales decreased 4% year over year. Sales from the Asia Pacific decreased 1% year over year.
Segmental Details
Revenues in the Industrial segment totaled $157.1 million (contributing to 29.1% of the quarter’s sales), rising 1% year over year, driven by improved project activity in the Asia Pacific region. Our estimate for segmental revenues was $161.5 million. Favorable foreign currency translations increased sales by 2%. Core sales declined 2% year over year.
Revenues in the Process segment grossed $137.3 million (contributing to 25.4% of the quarter’s sales), increasing 9.5% year over year. Our estimate for segmental revenues was $135.9 million. The improvement came on the back of a 9% rise in core sales. Favorable foreign currency translations increased sales by 1%.
Revenues in the Contractor segment totaled $245.3 million (contributing to 45.5% of the quarter’s sales), down 7% year over year due to slower economic activity in construction markets. Our estimate for segmental revenues was $260.9 million. Core sales declined 8% in the quarter. Favorable foreign currency translations increased sales by 1%.
Graco Inc. Price, Consensus and EPS Surprise
Graco Inc. price-consensus-eps-surprise-chart | Graco Inc. Quote
Margin Profile
In the third quarter, Graco’s cost of sales declined 10.3% year over year to $255.1 million. Gross profit increased 9% to $284.5 million while the margin increased 4.9 percentage points. The favorable effects of realized pricing and lower product cost benefited the margin’s performance.
Operating income increased 14% year over year to $163.2 million. The operating margin increased by 4 percentage points from the year-ago quarter. Interest expenses in the first nine months totaled $4.5 million compared with $8.6 million reported in the year-ago period. The adjusted effective tax rate in the quarter was 19%.
Balance Sheet and Cash Flow
Exiting the third quarter, Graco had cash and cash equivalents of $525.8 million compared with $339.2 million at the end of 2022.
Graco generated net cash of $491.4 million from operating activities in the first nine months of 2023 compared with $271.6 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $145.6 million compared with $147.2 million in the year-ago period.
GGG paid out dividends worth $118.7 million to its shareholders in the first nine months of 2023, up 11.1% from the previous year. Graco repurchased common stocks worth $27.1 million in the first nine months of 2023.
Outlook
The company expects low single-digit organic revenue growth on a constant-currency basis for 2023.
Zacks Rank & Stocks to Consider
GGG currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 21.2% in the past year.
Axon Enterprise, Inc. AXON currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 38% in the past year.
Caterpillar Inc. CAT presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 1.5%. The stock has gained 10.3% in the past year.
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