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Graco Inc. (GGG - Free Report) has been benefiting from solid demand for its products, product investments, pricing actions and a sound customer base. For 2022, the company expects its organic sales to grow in the high-single digits. In the quarters ahead, the company’s healthy liquidity position, with cash and cash equivalents of $380 million, exiting first-quarter 2022, is also likely to be beneficial.
Graco’s focus on product innovations and capacity expansion bodes well. It plans to invest $190 million to roll out machinery and equipment in 2022, including $140 million for the expansion of facilities. Some of the notable product introductions made by the company over the past few quarters are SaniSpray HP 20 electrostatic sprayer, Voltex Dynamic Mix Valve, PerformAA air-assist and airless spray guns, and Contractor King air-powered protective coatings sprayer, among others.
It focuses on rewarding shareholders through dividend payments and share repurchases. In first-quarter 2022, Graco used $36 million for paying out dividends and repurchasing shares worth $109 million. The quarterly dividend rate was hiked by 12% in December 2021.
However, the company has been dealing with the adverse impacts of escalating costs and expenses. In first-quarter 2022, its cost of sales increased 15.9% year over year while its gross margin fell 300 basis points (bps). Also, operating expenses expanded 6%, while the operating margin was down 230 bps. For 2022, Graco expects woes related to supply-chain issues and logistics problems to persist.
Given its extensive presence across international markets, it is subject to risks arising from the unfavorable movements in foreign currencies, geopolitical issues and other headwinds. In first-quarter 2022, foreign currency translation had a negative impact of 3% on the Industrial and 1% on Contractor segments’ sales. For 2022, unfavorable movements in foreign currencies are expected to lower Graco’s sales by 2%.
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) stock has lost 5.5% compared with the industry’s decline of 2.1%.
Stocks to Consider
Some better-ranked companies from the Zacks industrial products sector are discussed below:
AIT’s earnings estimates have been stable for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have rallied 5.8% in the past three months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 30 days, ROP’s earnings estimates have increased 0.1% for 2022. The stock has dipped 3% in the past three months.
IDEX Corporation (IEX - Free Report) is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 30 days, the stock’s earnings estimates have increased 1.9% for 2022. The stock has gained 6.5% in the past three months.
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Graco (GGG) Displays Bright Prospects, Headwinds Persist
Graco Inc. (GGG - Free Report) has been benefiting from solid demand for its products, product investments, pricing actions and a sound customer base. For 2022, the company expects its organic sales to grow in the high-single digits. In the quarters ahead, the company’s healthy liquidity position, with cash and cash equivalents of $380 million, exiting first-quarter 2022, is also likely to be beneficial.
Graco’s focus on product innovations and capacity expansion bodes well. It plans to invest $190 million to roll out machinery and equipment in 2022, including $140 million for the expansion of facilities. Some of the notable product introductions made by the company over the past few quarters are SaniSpray HP 20 electrostatic sprayer, Voltex Dynamic Mix Valve, PerformAA air-assist and airless spray guns, and Contractor King air-powered protective coatings sprayer, among others.
It focuses on rewarding shareholders through dividend payments and share repurchases. In first-quarter 2022, Graco used $36 million for paying out dividends and repurchasing shares worth $109 million. The quarterly dividend rate was hiked by 12% in December 2021.
However, the company has been dealing with the adverse impacts of escalating costs and expenses. In first-quarter 2022, its cost of sales increased 15.9% year over year while its gross margin fell 300 basis points (bps). Also, operating expenses expanded 6%, while the operating margin was down 230 bps. For 2022, Graco expects woes related to supply-chain issues and logistics problems to persist.
Given its extensive presence across international markets, it is subject to risks arising from the unfavorable movements in foreign currencies, geopolitical issues and other headwinds. In first-quarter 2022, foreign currency translation had a negative impact of 3% on the Industrial and 1% on Contractor segments’ sales. For 2022, unfavorable movements in foreign currencies are expected to lower Graco’s sales by 2%.
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) stock has lost 5.5% compared with the industry’s decline of 2.1%.
Stocks to Consider
Some better-ranked companies from the Zacks industrial products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have been stable for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have rallied 5.8% in the past three months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 30 days, ROP’s earnings estimates have increased 0.1% for 2022. The stock has dipped 3% in the past three months.
IDEX Corporation (IEX - Free Report) is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 30 days, the stock’s earnings estimates have increased 1.9% for 2022. The stock has gained 6.5% in the past three months.