Graco Inc.’s (GGG - Free Report) third-quarter 2023 adjusted earnings of 76 cents per share beat the Zacks Consensus Estimate of adjusted earnings of 73 cents per share. The bottom line improved 16.7% year over year due to solid momentum in the Industrial and Process segments. Shares of the company have increased 2.7% since the earnings release on Oct 25.
However, GGG’s net sales of $539.7 million underperformed the consensus estimate of $559 million. The top line decreased 1.1% year over year.
On a regional basis, quarterly sales generated from the Americas were flat year over year. In Europe, the Middle East and Africa region, sales decreased 4% year over year. Sales from the Asia Pacific decreased 1% year over year.
Segmental Details
Revenues in the Industrial segment totaled $157.1 million (contributing to 29.1% of the quarter’s sales), rising 1% year over year, driven by improved project activity in the Asia Pacific region. Our estimate for segmental revenues was $161.5 million. Favorable foreign currency translations increased sales by 2%. Core sales declined 2% year over year.
Revenues in the Process segment grossed $137.3 million (contributing to 25.4% of the quarter’s sales), increasing 9.5% year over year. Our estimate for segmental revenues was $135.9 million. The improvement came on the back of a 9% rise in core sales. Favorable foreign currency translations increased sales by 1%.
Revenues in the Contractor segment totaled $245.3 million (contributing to 45.5% of the quarter’s sales), down 7% year over year due to slower economic activity in construction markets. Our estimate for segmental revenues was $260.9 million. Core sales declined 8% in the quarter. Favorable foreign currency translations increased sales by 1%.
Margin Profile
In the third quarter, Graco’s cost of sales declined 10.3% year over year to $255.1 million. Gross profit increased 9% to $284.5 million while the margin increased 4.9 percentage points. The favorable effects of realized pricing and lower product cost benefited the margin’s performance.
Operating income increased 14% year over year to $163.2 million. The operating margin increased by 4 percentage points from the year-ago quarter. Interest expenses in the first nine months totaled $4.5 million compared with $8.6 million reported in the year-ago period. The adjusted effective tax rate in the quarter was 19%.
Balance Sheet and Cash Flow
Exiting the third quarter, Graco had cash and cash equivalents of $525.8 million compared with $339.2 million at the end of 2022.
Graco generated net cash of $491.4 million from operating activities in the first nine months of 2023 compared with $271.6 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $145.6 million compared with $147.2 million in the year-ago period.
GGG paid out dividends worth $118.7 million to its shareholders in the first nine months of 2023, up 11.1% from the previous year. Graco repurchased common stocks worth $27.1 million in the first nine months of 2023.
Outlook
The company expects low single-digit organic revenue growth on a constant-currency basis for 2023.
Zacks Rank & Stocks to Consider
GGG currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 21.2% in the past year.
Axon Enterprise, Inc. (AXON - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 38% in the past year.
Caterpillar Inc. (CAT - Free Report) presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 1.5%. The stock has gained 10.3% in the past year.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Graco Inc.’s (GGG - Free Report) third-quarter 2023 adjusted earnings of 76 cents per share beat the Zacks Consensus Estimate of adjusted earnings of 73 cents per share. The bottom line improved 16.7% year over year due to solid momentum in the Industrial and Process segments. Shares of the company have increased 2.7% since the earnings release on Oct 25.
However, GGG’s net sales of $539.7 million underperformed the consensus estimate of $559 million. The top line decreased 1.1% year over year.
On a regional basis, quarterly sales generated from the Americas were flat year over year. In Europe, the Middle East and Africa region, sales decreased 4% year over year. Sales from the Asia Pacific decreased 1% year over year.
Segmental Details
Revenues in the Industrial segment totaled $157.1 million (contributing to 29.1% of the quarter’s sales), rising 1% year over year, driven by improved project activity in the Asia Pacific region. Our estimate for segmental revenues was $161.5 million. Favorable foreign currency translations increased sales by 2%. Core sales declined 2% year over year.
Revenues in the Process segment grossed $137.3 million (contributing to 25.4% of the quarter’s sales), increasing 9.5% year over year. Our estimate for segmental revenues was $135.9 million. The improvement came on the back of a 9% rise in core sales. Favorable foreign currency translations increased sales by 1%.
Revenues in the Contractor segment totaled $245.3 million (contributing to 45.5% of the quarter’s sales), down 7% year over year due to slower economic activity in construction markets. Our estimate for segmental revenues was $260.9 million. Core sales declined 8% in the quarter. Favorable foreign currency translations increased sales by 1%.
Margin Profile
In the third quarter, Graco’s cost of sales declined 10.3% year over year to $255.1 million. Gross profit increased 9% to $284.5 million while the margin increased 4.9 percentage points. The favorable effects of realized pricing and lower product cost benefited the margin’s performance.
Operating income increased 14% year over year to $163.2 million. The operating margin increased by 4 percentage points from the year-ago quarter. Interest expenses in the first nine months totaled $4.5 million compared with $8.6 million reported in the year-ago period. The adjusted effective tax rate in the quarter was 19%.
Balance Sheet and Cash Flow
Exiting the third quarter, Graco had cash and cash equivalents of $525.8 million compared with $339.2 million at the end of 2022.
Graco generated net cash of $491.4 million from operating activities in the first nine months of 2023 compared with $271.6 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $145.6 million compared with $147.2 million in the year-ago period.
GGG paid out dividends worth $118.7 million to its shareholders in the first nine months of 2023, up 11.1% from the previous year. Graco repurchased common stocks worth $27.1 million in the first nine months of 2023.
Outlook
The company expects low single-digit organic revenue growth on a constant-currency basis for 2023.
Zacks Rank & Stocks to Consider
GGG currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 21.2% in the past year.
Axon Enterprise, Inc. (AXON - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 38% in the past year.
Caterpillar Inc. (CAT - Free Report) presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 1.5%. The stock has gained 10.3% in the past year.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Get the latest research report on CAT - FREE
Get the latest research report on AIT - FREE
Get the latest research report on GGG - FREE
Get the latest research report on AXON - FREE