Graco Gains From Business Strength Despite Persisting Headwinds

Graco Inc. GGG is poised to gain from solid momentum in the Industrial and Expansion Markets segments. Robust demand for powder finishing and lubrication product lines is driving the Industrial segment’s performance. Also, higher demand for vehicle services augurs well. Strength in the semiconductor business, driven by an increasing order rate, is boosting the Expansion Markets segment. Favorable pricing actions also bode well for it.

Over time, GGG has expanded its market share, product offerings and customer base 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 its customer offerings and its position in the paint and coating machinery market. In August 2024, the company 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 Graco’s sales in the second quarter of 2025.

GGG’s commitment to rewarding shareholders through dividend payments and share buybacks is 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.

Some Negatives

Persistent softness 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 company has been dealing with the adverse impacts of high costs and expenses. 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.

GGG is engaged in designing, manufacturing and marketing equipment and systems used to measure, move, control, spray and dispense fluid as well as powder materials. The company, which belongs to the Manufacturing - General Industrial industry, faces stiff competition from peers like Flowserve Corporation FLS, Graham Corporation GHM and Ingersoll Rand Inc. IR.

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