Rising demand for U.S.-made machinery, expanding industrial production, and favorable policy changes, like the Tax Cut and Jobs Act introduced in December 2017, appear to be boon for industrial tool makers. Growth of the global and U.S. economy, as well as infrastructural investments, creates additional tailwinds.
Of the many investment options in the machinery space, we believe that choosing Graco Inc. (GGG - Free Report) will be a smart choice. The stock currently carries a Zacks Rank #2 (Buy). Further, it dons a favorable Growth Score of B.
Moreover, the industry, to which Graco belongs, is positioned in the top 32% of more than 250 Zacks industries. Per our research, the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Over the past month, Graco’s shares have yielded 12% return, outperforming 3.9% growth recorded by the industry.
Let’s delve deeper and discuss why Graco is a suitable investment option.
Earnings — Solid Performance & Robust Outlook: Of the last four quarters, Graco surpassed estimates in two, the average earnings surprise being +4.05%. In the third quarter of 2018, the company’s earnings beat estimates by 8.7%. Moreover, sales growth and solid operational performance drove bottom-line results by 31.6% year over year.
We believe that healthy demand for Graco’s products in the end-markets served — including industry & machinery, residential & non-residential construction, automotive, and others — will be a boon. This, along with efforts to boost margins, might support bottom-line growth in the quarters ahead.
Graco does not provide earnings projections but upward revision in earnings estimates by brokerage firms is reflective of positive sentiments toward the company. In the past 30 days, earnings estimates for 2018 have been raised by eight brokerage firms while that for 2019 have been increased by six. Currently, the Zacks Consensus Estimate for earnings per share stands at $1.88 for 2018 and $2.02 for 2019, reflecting growth of 2.2% and 2% from the respective 30-day-ago tallies.
Graco Inc. Price and Consensus