Graco (GGG, Financial) is addressing the challenges posed by recent changes in tariff policies, particularly those affecting its operations in China. China accounts for approximately 6% of Graco's worldwide sales and is also a source of materials making up about 6% of the company's global production costs. These evolving trade policies have introduced economic uncertainty that may negatively affect the company's full-year revenue forecast by around 1% to 2%.
Despite these challenges, Graco remains optimistic about maintaining its annual revenue growth predictions, expecting low-single digit growth on an organic constant currency basis. The company is actively monitoring the situation and is prepared to adapt its strategies as needed to mitigate potential impacts.
Graco's long-term prospects continue to appear promising as it stays committed to implementing its established growth strategies and investing in its ongoing business development. The company emphasizes its readiness to address short-term challenges while focusing on sustainable success in the future.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 8 analysts, the average target price for Graco Inc (GGG, Financial) is $90.16 with a high estimate of $105.00 and a low estimate of $80.30. The average target implies an upside of 14.17% from the current price of $78.97. More detailed estimate data can be found on the Graco Inc (GGG) Forecast page.
Based on the consensus recommendation from 12 brokerage firms, Graco Inc's (GGG, Financial) average brokerage recommendation is currently 2.7, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Graco Inc (GGG, Financial) in one year is $82.51, suggesting a upside of 4.48% from the current price of $78.97. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Graco Inc (GGG) Summary page.
Key Business Developments
Release Date: January 28, 2025
- Fourth Quarter Sales: $549 million, a decrease of 3% from the same quarter last year.
- Acquisitions Contribution: 3% sales growth in the quarter.
- Net Earnings: $109 million, a decrease of 1% for the quarter.
- Adjusted Non-GAAP Net Earnings: $110 million, a decrease of 20%.
- Gross Margin Rate: Decreased by 200 basis points in the quarter.
- Operating Expenses: Increased by $19 million or 15% in the quarter.
- Operating Margin Rate: 24% compared to 30% for the same quarter last year.
- Industrial Segment Operating Margin Rate: 33% compared to 37% for the same quarter last year.
- Process Segment Operating Margin Rate: 29% compared to 28% for the same quarter last year.
- Contractor Segment Operating Margin Rate: 27% compared to 29% for the same quarter last year.
- Cash Provided by Operations: $622 million for the year, a decrease of $29 million from last year.
- Share Repurchases: 399,000 shares for $31 million.
- Acquisitions: $242 million.
- Dividends: $172 million.
- Capital Expenditures: $107 million, with $67 million related to facility expansion projects.
- Adjusted Effective Tax Rate: 21.5% for the quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Graco Inc (GGG, Financial) reported a successful acquisition of Corob, which contributed 3% revenue growth in the fourth quarter.
- The company has completed expansion projects for nearly all operations, which positions them well for future demand.
- Graco Inc (GGG) has a strong cash flow, providing flexibility for future investments and operations.
- The new global customer-centric operating structure is expected to generate annual savings of approximately $16 million.
- Protective coatings activities showed strong growth across all regions, supported by infrastructure investments and increases in the container market.
Negative Points
- Fourth quarter sales decreased by 3% compared to the same quarter last year, with a 6% decline excluding acquisitions.
- Reported net earnings decreased by 1% to $109 million, with adjusted non-GAAP net earnings down 20%.
- Gross margin rate decreased by 200 basis points due to lower sales volume and unfavorable product and channel mix.
- Total operating expenses increased by 15% due to business reorganization costs, expenses from acquired operations, and litigation costs.
- The industrial segment experienced a 13% revenue decline for the quarter, impacted by weakness in key markets such as China and the semiconductor business.
