Graco's Earnings Miss Estimates in Q2, Sales Increase Y/Y

Graco Inc.’s GGG second-quarter 2025 adjusted earnings of 75 cents per share missed the Zacks Consensus Estimate of 78 cents. The bottom line decreased 3% year over year.

The company’s net sales of $571.8 million lagged the consensus estimate of $585 million. However, the top line increased 3% year over year due to incremental sales from acquired operations and sales growth across the EMEA and Asia Pacific regions.

On a regional basis, quarterly sales generated from the Americas decreased 3% year over year. In Europe, the Middle East and Africa, sales increased 19% year over year. Sales from the Asia Pacific increased 12% year over year.

Segmental Details of Graco

Effective Jan. 1, 2025, Graco classified its business into three reportable segments, namely, the Contractor segment, Industrial segment and Expansion Markets segment.

Net sales in the Contractor segment totaled $289 million (contributing to 50.5% of the quarter’s sales), up 7% year over year. While acquisitions had a positive impact of 12% on sales growth, organic sales declined 5%. Our estimate for segmental net sales was $287.2 million.

Net sales in the Industrial segment totaled $242.2 million (contributing to 42.4% of the quarter’s sales), which were relatively flat year over year. While forex woes had a favorable impact of 1% on sales, organic sales fell 1%. Our estimate for segmental net sales was $244.3 million.

Net sales in the Expansion Markets segment grossed $40.6 million (contributing to 7.1% of the quarter’s sales), decreasing 3% year over year. Organic sales decreased 3% on a year-over-year basis. Our estimate for segmental net sales was $46.2 million.

Graco Inc. Price, Consensus and EPS Surprise

Graco Inc. price-consensus-eps-surprise-chart | Graco Inc. Quote

Margin Profile of Graco

In the second quarter, Graco’s cost of sales increased 7.9% year over year to $272.3 million. Gross profit decreased 0.5% to $299.5 million while the margin declined two percentage points. Lower margin rates from acquired operations and higher product costs affected the margin’s performance.

Operating income decreased 2% year over year to $157.5 million. The operating margin decreased 1.7 percentage points from the year-ago quarter. Interest expenses totaled $655 million compared with $634 million in the previous year’s quarter. The adjusted effective tax rate was 19% compared with the year-ago quarter’s 20%.

Graco’s Balance Sheet and Cash Flow

Exiting the second quarter, Graco had cash and cash equivalents of $534.9 million compared with $675.3 million at the end of 2024.

It generated net cash of $308.1 million from operating activities in the first six months of 2025 compared with $257.9 million in the year-ago period. Capital used for purchasing property, plant and equipment totaled $30.2 million compared with $73.4 million in the year-ago period.

Graco paid out dividends worth $92.2 million to its shareholders in the year, up 7.2% from the previous year. It repurchased shares worth $361 million in the same period.

GGG’s 2025 Outlook

The company expects organic net sales to increase in the low single digits on a constant-currency basis in 2025.

GGG’s Zacks Rank and Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks are discussed below:

Flowserve Corporation FLS presently sports a Zacks Rank of 1. FLS’ earnings surpassed the consensus estimate twice and missed on the other two occasions in the trailing four quarters. The average earnings surprise was 5.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2025 earnings has increased 0.6%.

EnerSys ENS currently carries a Zacks Rank #2 (Buy). ENS has an impressive earnings surprise history, having outperformed the consensus estimate in each of the preceding four quarters, with an average surprise of 3.2%. In the past 60 days, the Zacks Consensus Estimate for Enersys’ 2025 earnings has decreased 0.8%.

IDEX Corporation IEX currently carries a Zacks Rank of 2. IEX has an impressive earnings surprise history, having outperformed the consensus estimate in each of the preceding four quarters, with an average surprise of 2.2%.  In the past 60 days, the Zacks Consensus Estimate for IDEX’s 2025 earnings has inched up 0.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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