Back to top

Bull of the Day

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

The industrial companies are hanging in there despite predictions that the end of the cycle is near. Graco Inc. (GGG - Snapshot Report) recently beat the Zacks Consensus by 15.1%. This Zacks Rank #1 (Strong Buy) is expected to grow earnings in the double digits in both 2013 and in 2014.

Graco may not be a household name, but it makes products which influence every day life. It makes fluid-handling equipment and systems, with one of its best known products being the spray gun which is used to apply paint to homes, businesses and cars. But its systems also have other applications including squeezing tomato paste onto millions of frozen pizzas.

Founded in 1926 in Minnesota, the company has survived many different recessions and economic conditions. It is now global, with a diverse worldwide customer base.

Record Sales in Q1

On Apr 24, Graco announced record sales as they jumped 15% compared to a year ago to $269 million, however some of that was driven by the acquisition of Gema powder finishing business in August of 2012.

Graco operates in 3 segments: Industrial, Contractor and Lubrication.

Contractor sales were the strongest of the segments jumping 7.8% and up 11% in the Americas on the strength of the U.S. construction market and the recovery of the U.S. housing market.

The Industrial segment started the year slower than anticipated but it did see some strength in the auto market. The Lubrication segment was the weakest segment as revenues slipped 3% due to Asian sales sliding 28% as mining weakened. But Lubrication is just 10% of the company's revenue.

Still, Graco easily beat the Zacks Consensus Estimate by 11 cents. Margins expanded due to manufacturing cost improvements.

Double Digit Earnings Growth Expected

The analysts are bullish on Graco in 2013. 1 estimate for 2013 has already been revised higher in the last week. Earnings are expected to grow 22% in 2013 and another 10.3% in 2014.

These older manufacturing companies are suddenly in vogue with investors. Graco's shares are at 10-year highs. Check out the 2-year chart which shows the recent jump on the earnings beat.

But shares are also pretty pricey, at least historically, It is trading with a forward P/E of 20x, which is higher than its 10-year median of just 16.7.

Still, Graco has been rewarding shareholders with a dividend, currently yielding 1.7%.

If you're looking to invest in an older legacy industrial with income, Graco is one to have on your short list.

Want More of Our Best Recommendations?

Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%