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Graco Inc.’s (GGG - Free Report) fourth-quarter 2023 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The bottom line improved 10% year over year due to solid momentum in the Industrial, Process and Contractor segments. Shares of the company have increased 2.2% since the earnings release on Oct 29.
The company’s net sales of $566.6 million managed to beat the consensus estimate of $566 million. The top line also increased 2% year over year. On a regional basis, quarterly sales generated from the Americas increased 3% year over year. In Europe, the Middle East and Africa (EMEA), sales increased 5% year over year. Sales from the Asia Pacific decreased 5% year over year.
Segmental Details
Revenues in the Industrial segment totaled $192 million (contributing to 33.9% of the quarter’s sales), rising 1% year over year, driven by end-market strength in the Americas. However, this was partially offset by low finishing system sales in the EMEA and Asia Pacific regions. Our estimate for segmental revenues was $197.7 million. Favorable foreign currency translations increased sales by 2%. Core sales declined 1% year over year.
Revenues in the Process segment grossed $135.9 million (contributing to 24% of the quarter’s sales), increasing 4% year over year. Our estimate for the segment’s revenues was $145.8 million. The improvement came on the back of a 4% rise in core sales.
Revenues in the Contractor segment totaled $238.8 million (contributing to 42.1% of the quarter’s sales), up 2% year over year, supported by positive responses from new product offerings. However, the gains were partially offset by slower economic activity in construction markets. Our estimate for segmental revenues was $223.5 million. Core sales improved 1% in the quarter. Favorable foreign currency translations increased sales by 1%.
In the fourth quarter, Graco’s cost of sales declined 5.5% year over year to $266.7 million. Gross profit increased 9.9% to $299.9 million, while the margin rose 4 percentage points. The favorable effects of realized pricing and lower product costs benefited the margin’s performance.
Operating income increased 11.4% year over year to $169.9 million. The operating margin increased 3 percentage points from the year-ago quarter. Interest expenses in 2023 totaled $5.2 million compared with $9.9 million reported in the previous year. The adjusted effective tax rate in the quarter was 14%, while the same for 2023 was 17%.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Graco had cash and cash equivalents of $538 million compared with $339.2 million at the end of 2022. It generated net cash of $651 million from operating activities in 2023 compared with $377.4 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $184.8 million compared with $201.2 million in the year-ago period.
GGG paid out dividends worth $158.3 million to its shareholders in 2023, up 11.4% from the previous year. It repurchased common stocks worth $102.3 million in 2023.
Outlook
The company remains focused on its core strategies, including new product introduction, accessing new markets and targeting strategic acquisitions to enhance shareholder value. It expects low single-digit organic revenue growth on a constant-currency basis for 2024.
Zacks Rank & Other Stocks to Consider
Graco currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the same space are discussed below:
The Zacks Consensus Estimate for AIT’s fiscal 2024 (ending June 2024) earnings remained steady in the past 60 days.
Flowserve Corporation (FLS - Free Report) presently carries a Zacks Rank of 2. FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady.
Crane Company (CR - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 25.1%. In the past 60 days, the Zacks Consensus Estimate for Crane’s 2024 earnings has increased 0.6%.
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Graco (GGG) Q4 Earnings & Sales Beat Estimates, Increase Y/Y
Graco Inc.’s (GGG - Free Report) fourth-quarter 2023 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The bottom line improved 10% year over year due to solid momentum in the Industrial, Process and Contractor segments. Shares of the company have increased 2.2% since the earnings release on Oct 29.
The company’s net sales of $566.6 million managed to beat the consensus estimate of $566 million. The top line also increased 2% year over year.
On a regional basis, quarterly sales generated from the Americas increased 3% year over year. In Europe, the Middle East and Africa (EMEA), sales increased 5% year over year. Sales from the Asia Pacific decreased 5% year over year.
Segmental Details
Revenues in the Industrial segment totaled $192 million (contributing to 33.9% of the quarter’s sales), rising 1% year over year, driven by end-market strength in the Americas. However, this was partially offset by low finishing system sales in the EMEA and Asia Pacific regions. Our estimate for segmental revenues was $197.7 million. Favorable foreign currency translations increased sales by 2%. Core sales declined 1% year over year.
Revenues in the Process segment grossed $135.9 million (contributing to 24% of the quarter’s sales), increasing 4% year over year. Our estimate for the segment’s revenues was $145.8 million. The improvement came on the back of a 4% rise in core sales.
Revenues in the Contractor segment totaled $238.8 million (contributing to 42.1% of the quarter’s sales), up 2% year over year, supported by positive responses from new product offerings. However, the gains were partially offset by slower economic activity in construction markets. Our estimate for segmental revenues was $223.5 million. Core sales improved 1% in the quarter. Favorable foreign currency translations increased sales by 1%.
Graco Inc. Price, Consensus and EPS Surprise
Graco Inc. price-consensus-eps-surprise-chart | Graco Inc. Quote
Margin Profile
In the fourth quarter, Graco’s cost of sales declined 5.5% year over year to $266.7 million. Gross profit increased 9.9% to $299.9 million, while the margin rose 4 percentage points. The favorable effects of realized pricing and lower product costs benefited the margin’s performance.
Operating income increased 11.4% year over year to $169.9 million. The operating margin increased 3 percentage points from the year-ago quarter. Interest expenses in 2023 totaled $5.2 million compared with $9.9 million reported in the previous year. The adjusted effective tax rate in the quarter was 14%, while the same for 2023 was 17%.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Graco had cash and cash equivalents of $538 million compared with $339.2 million at the end of 2022.
It generated net cash of $651 million from operating activities in 2023 compared with $377.4 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $184.8 million compared with $201.2 million in the year-ago period.
GGG paid out dividends worth $158.3 million to its shareholders in 2023, up 11.4% from the previous year. It repurchased common stocks worth $102.3 million in 2023.
Outlook
The company remains focused on its core strategies, including new product introduction, accessing new markets and targeting strategic acquisitions to enhance shareholder value. It expects low single-digit organic revenue growth on a constant-currency basis for 2024.
Zacks Rank & Other Stocks to Consider
Graco currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the same space are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2. It has a trailing four-quarter average earnings surprise of 10.4%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for AIT’s fiscal 2024 (ending June 2024) earnings remained steady in the past 60 days.
Flowserve Corporation (FLS - Free Report) presently carries a Zacks Rank of 2. FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady.
Crane Company (CR - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 25.1%. In the past 60 days, the Zacks Consensus Estimate for Crane’s 2024 earnings has increased 0.6%.