Graco Inc. (GGG) reported stellar first quarter 2013 results with earnings of $52.1 million or 84 cents per share comparing with $35.4 million or 58 cents per share in the year-ago quarter. The year-over-year increase in earnings was primarily attributable to the accretive acquisition of the Gema Powder Finishing business and superior growth in the contractor business in the Americas. The earnings in the reported quarter were well ahead of the Zacks Consensus Estimate of 73 cents.
Net sales for first quarter 2013 came in at $269.0 million, up 15.0% year over year but missed the Zacks Consensus Estimate of $271 million. Quarterly sales increased 26% in Europe Middle East and Africa (:EMEA), 10% in the Americas and 16% in Asia Pacific.
Gross margin came in at 56%, down 1.5 percentage points from the year-ago quarter, driven by lower margins from acquired Powder Finishing operations, partially offset by price increases and manufacturing cost improvements.
The Industrial segment witnessed a 22% rise in sales to $164.2 million, driven by the Powder Finishing operations. On a geographic region basis, sales increased 3% in the Asia Pacific while decreased 8% in EMEA.
Net sales in the Contractor segment increased 8% year over year to $77.6 million, largely due to the strong performance in the Americas,
During the reported quarter, the Lubrication segment recorded a 3% decline in net sales to $27.2 million as sales increases in the Americas and EMEA were offset by decrease in Asia Pacific with weak demand in the mining sector.
Balance Sheet and Cash Flow
Cash and cash equivalents at Mar 29, 2013 were $36.9 million versus $31.1 million as of Dec 28, 2012. Long-term debt decreased to $520.9 million in Mar 29, 2013 from $556.5 million at year-end 2012. At Mar 31, 2013, net cash provided by operating activities surged to $39.2 million from $23.5 million in the prior-year period.
For full-year 2013, management anticipates growth across all geographic regions. In the Americas, the company expects to benefit from the continued recovery in its Contractor and Industrial segments. Despite the prevailing macroeconomic conditions in Western Europe and Asia Pacific, Graco expects its new product developments, sales initiatives and expansions to drive modest growth in EMEA and Asia Pacific in 2013.
Graco currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth considering now are The Babcock & Wilcox Company (BWC), EnPro Industries, Inc. (NPO) and Tri-Tech Holding, Inc. (TRIT), each carrying a Zacks Rank #1 (Strong Buy).
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