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Graco (GGG) Down 1.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Graco (GGG - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Graco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Second-Quarter 2018 Results
Graco reported mixed results for second-quarter 2018.
Earnings/Revenues
Graco’s quarterly adjusted earnings came in at 48 cents per share, up 26% year over year. The upswing was driven by strong operational performance, robust sales volumes and solid factory activity. However, the bottom line fell short of the Zacks Consensus Estimate of 50 cents per share.
Quarterly revenues came in at $424.6 million, up 12% year over year. The top line also surpassed the Zacks Consensus Estimate of $422 million. The upside primarily stemmed from acquisition benefits and favorable foreign currency-translation impact.
Segmental Break-Up
Revenues in the Industrial segment during the reported quarter came in at $190.5 million, up 8.9% year over year. This rise stemmed from robust finishing system sales and strong project activity.
The Process segment recorded revenues of $85.1 million, which improved 15.9% year over year. The segment’s improved top-line performance came on the back of robust lubrication, as well as oil and natural gas business.
The Contractor segment’s revenues grew 13.6% year over year to $149 million, driven by solid sales secured from all business channels.
Costs/Margins
Cost of products sold in the second quarter was $194.7 million, up 11.3% year over year.
Gross profit margin was 54.1%, up 20 basis points (bps) year over year.
Selling, marketing and distribution expenses during the quarter were $62.9 million, up 13.3% year over year. Operating margin in the reported quarter was 26.7%, up 20 bps year over year.
Balance Sheet/Cash Flow
Exiting the second quarter, Graco had cash and cash equivalents of $109.9 million, up from $103.7 million recorded as of Dec 29, 2017. Long-term debt stood at $297.3 million, higher than $226 million recorded at the end of 2017.
In first-half 2018, Graco generated $170.8-million cash from operating activities, higher than $135.7 million recorded in the comparable period last year. Capital expenditure totaled $27.4 million, higher than $16.6 million witnessed at the end of the first six months of 2017.
Outlook
Graco anticipates securing mid-to-high single-digit organic revenue growth in 2018. The company believes solid end-market demand will boost its near-term revenues and profitability. Nevertheless, the ongoing tariff-related concerns and material cost inflation remain causes of concern.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Graco has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, Graco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Graco (GGG) Down 1.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Graco (GGG - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Graco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Second-Quarter 2018 Results
Graco reported mixed results for second-quarter 2018.
Earnings/Revenues
Graco’s quarterly adjusted earnings came in at 48 cents per share, up 26% year over year. The upswing was driven by strong operational performance, robust sales volumes and solid factory activity. However, the bottom line fell short of the Zacks Consensus Estimate of 50 cents per share.
Quarterly revenues came in at $424.6 million, up 12% year over year. The top line also surpassed the Zacks Consensus Estimate of $422 million. The upside primarily stemmed from acquisition benefits and favorable foreign currency-translation impact.
Segmental Break-Up
Revenues in the Industrial segment during the reported quarter came in at $190.5 million, up 8.9% year over year. This rise stemmed from robust finishing system sales and strong project activity.
The Process segment recorded revenues of $85.1 million, which improved 15.9% year over year. The segment’s improved top-line performance came on the back of robust lubrication, as well as oil and natural gas business.
The Contractor segment’s revenues grew 13.6% year over year to $149 million, driven by solid sales secured from all business channels.
Costs/Margins
Cost of products sold in the second quarter was $194.7 million, up 11.3% year over year.
Gross profit margin was 54.1%, up 20 basis points (bps) year over year.
Selling, marketing and distribution expenses during the quarter were $62.9 million, up 13.3% year over year. Operating margin in the reported quarter was 26.7%, up 20 bps year over year.
Balance Sheet/Cash Flow
Exiting the second quarter, Graco had cash and cash equivalents of $109.9 million, up from $103.7 million recorded as of Dec 29, 2017. Long-term debt stood at $297.3 million, higher than $226 million recorded at the end of 2017.
In first-half 2018, Graco generated $170.8-million cash from operating activities, higher than $135.7 million recorded in the comparable period last year. Capital expenditure totaled $27.4 million, higher than $16.6 million witnessed at the end of the first six months of 2017.
Outlook
Graco anticipates securing mid-to-high single-digit organic revenue growth in 2018. The company believes solid end-market demand will boost its near-term revenues and profitability. Nevertheless, the ongoing tariff-related concerns and material cost inflation remain causes of concern.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Graco has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, Graco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.