Graco Stock Exhibits Strong Prospects Despite Persisting Headwinds

Graco Inc. GGG is benefiting from strength in the Industrial and Expansion Markets segments. Higher demand for powder finishing and lubrication product lines is aiding the Industrial segment’s performance. Also, higher demand for vehicle services augurs well. The segment’s core sales increased 2% year over year in the first six months of 2025. Solid momentum in the semiconductor business, driven by an increasing order rate, is boosting the Expansion Markets segment. Favorable pricing actions also bode well for the segment. The segment’s core sales increased 4% year over year in the first six months.

GGG remains focused on strengthening its competency through acquisitions. In July 2025, Graco acquired Color Service S.r.l. (Color Service), which has been added to its Industrial segment. The addition of Color Service’s automated dosing technology will enhance the company’s powder handling portfolio and expand its reach into new industries.

In November 2024, Graco acquired Corob S.p.A. (Corob), which has been added to its Contractor segment. The inclusion of Corob’s advanced product line, backed by strong design and manufacturing expertise, strengthens the company’s customer offerings and its position in the paint and coating machinery market. In August 2024, Graco completed the acquisition of PCT System. This buyout strengthened the company’s White Knight business and expanded its presence in the semiconductor market. Acquisitions had a contribution of 6% to GGG’s sales in the second quarter of 2025.

GGG’s shareholder-friendly policies are encouraging. The company paid out dividends worth $92.2 million to its shareholders in the first six months of 2025, reflecting an increase of 7.2% year over year. Also, Graco repurchased shares worth $361 million in the same period. In December 2024, the company hiked its quarterly dividend by 7.8% to 27.5 cents per share.

GGG’s Price Performance

In the past month, this Zacks Rank #3 (Hold) company’s shares have gained 2.8% compared with the industry’s 0.7% growth.

However, weakness in the Contractor segment is concerning for Graco. High housing costs and lower construction projects in North America are affecting the segment’s performance. Reduced demand in the home center channel, due to lower foot traffic and decreased consumer activity arising from softness in the U.S. housing and remodeling markets, is concerning as well. The segment’s core sales declined 3% year over year in the first six months of 2025.

Escalating costs and expenses have been a concern for GGG over time. In the first six months of 2025, the company’s general and administrative expenses increased 7.3% year over year. Also, it’s cost of sales increased 9.3% year over year in the first half of 2025. The metric, as a percentage of net sales, increased 170 basis points year over year.

Stocks to Consider

Some better-ranked companies are discussed below.

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FLS delivered a trailing four-quarter average earnings surprise of 5.5%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2025 earnings has increased 4.7%.

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Dover Corporation DOV presently carries a Zacks Rank of 2. DOV delivered a trailing four-quarter average earnings surprise of 4%.

In the past 60 days, the consensus estimate for DOV’s 2025 earnings has inched up 1.2%.

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

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