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Graco Inc.’s (GGG - Free Report) first-quarter 2023 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate of 61 cents per share. Our estimate for first-quarter adjusted earnings was 60 cents per share. The bottom line improved 29.8% year over year.
GGG’s net sales of $529.6 million also outperformed the Zacks Consensus Estimate of $499 million. Our estimate for net sales in the reported quarter was $532.5 million. The top line increased 7.1% year over year driven by double-digit growth in the Process segment.
On a regional basis, quarterly sales generated from the Americas grew 8%. In Europe, the Middle East and Africa (EMEA) region, sales increased 2% year over year (or up 7% at the constant-currency rate). Sales from the Asia Pacific increased 6% year over year (or up 1% at the constant-currency rate).
Segmental Details
Revenues in the Industrial segment totaled $150.2 million (contributing to 28.4% of the quarter’s sales), rising 4% year over year, driven by solid growth in the Americas and EMEA regions. Our estimate for segmental revenues was $154.7 million. Adverse foreign currency translations lowered sales by 3%. Core sales grew 7% year over year.
Revenues in the Process segment grossed $133.5 million (contributing to 25.2% of the quarter’s sales), increasing 16% year over year. Our estimate for segmental revenues was $119.4 million. The improvement came on the back of a 16% rise in core sales, driven by growth in all product applications.
Revenues in the Contractor segment totaled $245.9 million (contributing to 46.4% of the quarter’s sales), up 5% year over year due to favorable response to new product offerings and improved product availability. Our estimate for segmental revenues was $225 million. Core sales increased 7% in the quarter.
In the first quarter, Graco’s cost of sales grew 2% year over year to $244.5 million. Gross profit decreased 1% to $285.1 million, while the margin increased by 12 percentage points. The favorable effects of realized pricing and product and channel mix favored the margin’s performance.
Operating income increased 22% year over year to $156.7 million. The operating margin increased 3.6 percentage points from the year-ago quarter. Interest expenses in the quarter totaled $1.3 million, compared with $5.3 million reported in the year-ago period. The adjusted effective tax rate in the quarter was 18%.
Balance Sheet and Cash Flow
Exiting the first quarter, Graco had cash and cash equivalents of $395.3 million, compared with $339.2 million at the end of 2022. The long-term debt was $75 million, flat compared with the December 2022 level.
Graco generated net cash of $90.8 million from operating activities in the first three months of 2023, compared with $31.1 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $38.3 million, compared with $47.1 million in the year-ago period.
GGG paid out dividends worth $39.4 million to its shareholders in the first three months of 2023, up 10.1% from the previous year. Graco repurchased common stocks worth $7.8 million in the first three months of 2023.
Outlook
Amid microeconomic uncertainties, Graco expects to benefit from robust end-market activity and strong demand trends for new and existing products. 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 top-ranked companies from the Industrial Products sector are discussed below:
ALG’s earnings surprise in the last four quarters was 6.0%, on average. In the past 60 days, estimates for Alamo’s 2023 earnings have increased 7.5%. The stock has gained 17.5% in the past six months.
Ingersoll Rand Inc. (IR - Free Report) presently sports a Zacks Rank of 1. IR’s earnings surprise in the last four quarters was 8.5%, on average.
In the past 60 days, estimates for Ingersoll Rand’s 2023 earnings have increased 3.3%. The stock has rallied 12.8% in the past six months.
Allegion plc (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). ALLE’s earnings surprise in the last four quarters was 12.5%, on average.
In the past 60 days, Allegion’s earnings estimates have increased 1.1% for 2023. The stock has gained 6.4% in the past six months.
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Graco (GGG) Q1 Earnings & Revenues Beat, Increase Y/Y
Graco Inc.’s (GGG - Free Report) first-quarter 2023 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate of 61 cents per share. Our estimate for first-quarter adjusted earnings was 60 cents per share. The bottom line improved 29.8% year over year.
GGG’s net sales of $529.6 million also outperformed the Zacks Consensus Estimate of $499 million. Our estimate for net sales in the reported quarter was $532.5 million. The top line increased 7.1% year over year driven by double-digit growth in the Process segment.
On a regional basis, quarterly sales generated from the Americas grew 8%. In Europe, the Middle East and Africa (EMEA) region, sales increased 2% year over year (or up 7% at the constant-currency rate). Sales from the Asia Pacific increased 6% year over year (or up 1% at the constant-currency rate).
Segmental Details
Revenues in the Industrial segment totaled $150.2 million (contributing to 28.4% of the quarter’s sales), rising 4% year over year, driven by solid growth in the Americas and EMEA regions. Our estimate for segmental revenues was $154.7 million. Adverse foreign currency translations lowered sales by 3%. Core sales grew 7% year over year.
Revenues in the Process segment grossed $133.5 million (contributing to 25.2% of the quarter’s sales), increasing 16% year over year. Our estimate for segmental revenues was $119.4 million. The improvement came on the back of a 16% rise in core sales, driven by growth in all product applications.
Revenues in the Contractor segment totaled $245.9 million (contributing to 46.4% of the quarter’s sales), up 5% year over year due to favorable response to new product offerings and improved product availability. Our estimate for segmental revenues was $225 million. Core sales increased 7% in the quarter.
Graco Inc. Price, Consensus and EPS Surprise
Graco Inc. price-consensus-eps-surprise-chart | Graco Inc. Quote
Margin Profile
In the first quarter, Graco’s cost of sales grew 2% year over year to $244.5 million. Gross profit decreased 1% to $285.1 million, while the margin increased by 12 percentage points. The favorable effects of realized pricing and product and channel mix favored the margin’s performance.
Operating income increased 22% year over year to $156.7 million. The operating margin increased 3.6 percentage points from the year-ago quarter. Interest expenses in the quarter totaled $1.3 million, compared with $5.3 million reported in the year-ago period. The adjusted effective tax rate in the quarter was 18%.
Balance Sheet and Cash Flow
Exiting the first quarter, Graco had cash and cash equivalents of $395.3 million, compared with $339.2 million at the end of 2022. The long-term debt was $75 million, flat compared with the December 2022 level.
Graco generated net cash of $90.8 million from operating activities in the first three months of 2023, compared with $31.1 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $38.3 million, compared with $47.1 million in the year-ago period.
GGG paid out dividends worth $39.4 million to its shareholders in the first three months of 2023, up 10.1% from the previous year. Graco repurchased common stocks worth $7.8 million in the first three months of 2023.
Outlook
Amid microeconomic uncertainties, Graco expects to benefit from robust end-market activity and strong demand trends for new and existing products. 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 top-ranked companies from the Industrial Products sector are discussed below:
Alamo Group Inc. (ALG - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
ALG’s earnings surprise in the last four quarters was 6.0%, on average. In the past 60 days, estimates for Alamo’s 2023 earnings have increased 7.5%. The stock has gained 17.5% in the past six months.
Ingersoll Rand Inc. (IR - Free Report) presently sports a Zacks Rank of 1. IR’s earnings surprise in the last four quarters was 8.5%, on average.
In the past 60 days, estimates for Ingersoll Rand’s 2023 earnings have increased 3.3%. The stock has rallied 12.8% in the past six months.
Allegion plc (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). ALLE’s earnings surprise in the last four quarters was 12.5%, on average.
In the past 60 days, Allegion’s earnings estimates have increased 1.1% for 2023. The stock has gained 6.4% in the past six months.