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Graco Inc. Lowered to a Strong Sell on Dreary Prospects

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Zacks Investment Research downgraded Graco Inc. (GGG - Free Report) to a Zacks Rank #5 (Strong Sell) on Sep 10, 2016. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market.

Why the Downgrade?

Market sentiments have been weak for Graco Inc., given a 0.5% fall in its share price year-to-date. Also, the company’s financial performance in two out of last four quarters was weak. Last quarter, the company’s earnings of 89 cents per share came in below the Zacks Consensus Estimate of 99 cents, while decreasing 15% year over year. Roughly 4% rise in net sales was more than offset by 5.2% rise in cost of sales.

For 2016, Graco Inc. has reduced its organic sales growth expectation to low single-digit from the previous expectation of low-to-mid single-digit. The company predicts difficult operating conditions in the Process segment in second-half of the year. It also expects industrial business to remain weak in the Americas.

Investors seem to be skeptical about Graco Inc’s future prospects, as evident from downward revisions in earnings estimates for the stock. Over the last 60 days, the Zacks Consensus Estimate for the company decreased 6.1% to $3.39 per share for 2016 and by 5.1% to $3.76 per share for 2017. Also, the company has an Earnings ESP of -1.48% for 2016 and -2.66% for 2017.

Price and Consensus

 

Price and Consensus | Quote

Stocks to Consider

Graco Inc. has a market capitalization of approximately $4 billion. Some better-ranked stocks in the machinery industry include DXP Enterprises, Inc. (DXPE - Free Report) , Tennant Company (TNC - Free Report) and Gorman-Rupp Co. (GRC - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

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