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1. Company Snapshot

1.a. Company Description

Graco Inc.designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide.The company's Industrial segment offers proportioning systems to spray polyurethane foam and polyurea coatings; equipment that pumps, meters, mixes and dispenses sealant, adhesive, and composite materials; and gel-coat equipment, chop and wet-out systems, resin transfer molding systems and applicators, and precision dispensing solutions.


It also provides liquid finishing equipment; paint circulating and supply pumps; paint circulating advanced control systems; plural component coating proportioners; spare parts and accessories; and powder finishing products to coat powder finishing on metals under the Gema and SAT brands.The company's Process segment offers pumps to move and dispense chemicals, water, wastewater, petroleum, food, lubricants, and other fluids; pressure valves used in the oil and natural gas industry, other industrial processes, and research facilities; and chemical injection pumping solutions for injection of chemicals into producing oil wells and pipelines.It also supplies pumps, hose reels, meters, valves, and accessories for fast oil change facilities, service garages, fleet service centers, automobile dealerships, auto parts stores, truck builders, and heavy equipment service centers; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators in industrial and commercial equipment, compressors, turbines, and on- and off-road vehicles.


The company's Contractor segment offers sprayers to apply paint to walls and other structures; and viscous coatings to roofs, as well as markings on roads, parking lots, athletic fields, and floors.It sells its products through distributors, original equipment manufacturers, and home center channels; and directly to end-users.The company was incorporated in 1926 and is headquartered in Minneapolis, Minnesota.

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1.b. Last Insights on GGG

Graco Inc.'s recent performance was driven by strong Q1 2025 earnings and revenue growth, with sales increasing 7% year-over-year due to higher demand in all segments. The company's operating earnings also rose 8% year-over-year, driven by new product launches and accretive acquisitions. Additionally, Graco's shareholder-friendly policies, such as its commitment to returning capital to shareholders, have contributed to its positive performance.

1.c. Company Highlights

2. Graco's Q3 Earnings: A Mixed Bag

Graco reported third quarter sales of $543 million, an increase of 5% from the same quarter last year, with acquisitions contributing a strong 6% growth. However, organic sales declined 2% in the quarter. The company's reported net earnings increased 13% to $138 million or $0.82 per diluted share, while adjusted non-GAAP net earnings was $0.73 per diluted share, missing estimates of $0.75. The gross margin rate was flat compared to the same quarter last year.

Publication Date: Oct -27

📋 Highlights
  • Q3 Sales Growth: Sales increased 5% to $543 million, driven by acquisitions (6% contribution), but organic sales declined 2%.
  • Net Earnings Growth: Reported net earnings rose 13% to $138 million ($0.82/share), with adjusted non-GAAP earnings up 3% to $0.73/share.
  • Operating Expense Reduction: Operating expenses fell $6 million (5%) in Q3, contributing to cost efficiency.
  • Backlog Stability: Backlog levels remain stable at $225–$230 million, down from $500 million during the supply chain crisis.
  • Price Increases Impact: Late-Q3 price increases (low to mid-single digits) are expected to improve margins in Q4, with gross margins up excluding Corob acquisition.

Segment Performance

The Contractor segment continues to face headwinds from subdued construction activity and cautious consumer sentiment in North America. The Industrial segment delivered a 1% sales increase, supported by acquisitions and favorable exchange rates. Mark Sheahan noted that the company has implemented price increases in industrial categories, including Contractor, in the September timeframe, which will yield benefits in the fourth quarter.

Outlook and Valuation

Analysts estimate next year's revenue growth at 4.7%. With a current P/E Ratio of 27.42 and EV/EBITDA of 19.09, the market is pricing in a certain level of growth. The company's ROE of 19.59% and ROIC of 17.36% indicate a strong ability to generate returns on equity and invested capital. The dividend yield of 1.33% provides a relatively stable source of return for investors.

Operational Highlights

The One Graco initiative is driving margin improvement from cost initiatives and improved commercial performance. The teams are working well, and distributors are happy to have access to multiple product lines. Graco is also seeing traction in international markets like Mexico. According to Mark Sheahan, the pipeline for M&A is strong, and they are talking with companies regularly, with a focus on technology-based companies that add value and have growing management teams.

Margins and Pricing

Brad Hewitt asked about incremental margins for the Contractor business, and Mark Sheahan replied that pricing will help offset tariff costs, and a small volume increase would allow the business to realize efficiencies and return to 29-30% margin rates. The company's ability to push through price increases will be crucial in maintaining margins.

3. NewsRoom

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Franklin Resources Inc. Reduces Stock Position in Graco Inc. $GGG

Dec -02

Source: defenseworld.net

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AlphaCore Capital LLC Acquires New Holdings in Graco Inc. $GGG

Nov -26

Source: defenseworld.net

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Graco Inc. Acquires Radia Products, a Leading Manufacturer of Paint Mixing Equipment

Nov -17

Source: businesswire.com

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Graco Inc. $GGG Shares Bought by Allworth Financial LP

Nov -17

Source: defenseworld.net

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Graco Details Global Growth, Innovation and Safety Progress in Latest ESG Report

Nov -10

Source: businesswire.com

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5,490 Shares in Graco Inc. $GGG Purchased by World Investment Advisors

Nov -04

Source: defenseworld.net

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Graco Inc. Appoints Andrea (Andi) H. Simon to the Board of Directors

Oct -30

Source: businesswire.com

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Asset Management One Co. Ltd. Trims Position in Graco Inc. $GGG

Oct -29

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.76%)

6. Segments

Contractor

Expected Growth: 4.5%

Graco Inc.'s contractor segment growth of 4.5% is driven by increasing demand for painting and coating equipment, expansion into emerging markets, and strategic acquisitions. Additionally, the company's focus on innovation, such as the introduction of new products and technologies, has contributed to its growth. Furthermore, Graco's strong brand reputation and customer relationships have enabled the company to maintain its market share and capitalize on industry trends.

Industrial

Expected Growth: 4.8%

Graco Inc.'s Industrial segment growth of 4.8% is driven by increasing demand for industrial coatings and adhesives, expansion in emerging markets, and strategic acquisitions. Additionally, the company's focus on innovation, operational efficiency, and customer relationships has contributed to its growth momentum.

Process

Expected Growth: 5.2%

Graco Inc.'s 5.2% growth is driven by increasing demand for industrial coatings and adhesives, expansion in emerging markets, and strategic acquisitions. Additionally, the company's focus on innovation, operational efficiency, and cost savings initiatives have contributed to its growth momentum.

7. Detailed Products

Industrial Products

Graco's Industrial Products segment provides fluid handling equipment and systems for various industries, including manufacturing, processing, and construction.

Process Pumps

Graco's Process Pumps are designed for transferring and metering fluids in various industrial processes, including chemical processing, oil and gas, and water treatment.

Lubrication Systems

Graco's Lubrication Systems provide automated lubrication solutions for industrial equipment, vehicles, and machinery.

Dispense Equipment

Graco's Dispense Equipment is used for applying adhesives, sealants, and other materials in various industries, including automotive, aerospace, and construction.

Paint and Coatings Equipment

Graco's Paint and Coatings Equipment is designed for applying paints, coatings, and other finishes in various industries, including automotive, aerospace, and construction.

Oil and Natural Gas Equipment

Graco's Oil and Natural Gas Equipment is used for drilling, extraction, and production of oil and natural gas.

Contractor Equipment

Graco's Contractor Equipment is designed for professional contractors, including sprayers, pumps, and accessories for painting, coating, and texture applications.

8. Graco Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Graco Inc. faces moderate threat from substitutes due to the presence of alternative products in the market, such as manual painting tools and DIY painting kits.

Bargaining Power Of Customers

Graco Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products are specialized, making it difficult for customers to switch to alternative suppliers.

Bargaining Power Of Suppliers

Graco Inc. relies on a few large suppliers for raw materials, which gives them some bargaining power. However, the company's large scale of operations and diversified supply chain mitigate this risk.

Threat Of New Entrants

The capital-intensive nature of the painting equipment industry and the need for specialized technology and manufacturing expertise create barriers to entry, reducing the threat of new entrants.

Intensity Of Rivalry

The painting equipment industry is highly competitive, with several established players competing for market share. Graco Inc. faces intense rivalry from companies such as Titan Tool and 3M.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 2.20%
Debt Cost 8.15%
Equity Weight 97.80%
Equity Cost 8.15%
WACC 8.15%
Leverage 2.25%

11. Quality Control: Graco Inc. passed 9 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Graco

A-Score: 5.3/10

Value: 2.2

Growth: 5.2

Quality: 8.5

Yield: 2.0

Momentum: 4.0

Volatility: 10.0

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Franklin Electric Co

A-Score: 5.1/10

Value: 3.0

Growth: 6.8

Quality: 6.6

Yield: 2.0

Momentum: 3.0

Volatility: 9.0

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IDEX

A-Score: 4.8/10

Value: 3.1

Growth: 4.9

Quality: 7.9

Yield: 3.0

Momentum: 2.0

Volatility: 8.0

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Nordson

A-Score: 4.7/10

Value: 2.4

Growth: 5.0

Quality: 6.8

Yield: 2.0

Momentum: 3.0

Volatility: 8.7

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Flowserve

A-Score: 4.7/10

Value: 4.7

Growth: 4.6

Quality: 7.4

Yield: 3.0

Momentum: 4.0

Volatility: 4.3

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Kadant

A-Score: 4.2/10

Value: 2.4

Growth: 6.4

Quality: 7.0

Yield: 0.0

Momentum: 3.5

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

83.45$

Current Price

83.45$

Potential

-0.00%

Expected Cash-Flows