A month has gone by since the last earnings report for Graco Inc. (GGG). Shares have added about 4.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Graco due for a pullback? 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.
Graco fourth-quarter 2024 adjusted earnings of 64 cents per share missed the Zacks Consensus Estimate of 76 cents. The bottom line declined 20% year over year.
The company’s net sales of $548.7 million missed the consensus estimate of $554 million. The top line fell 3% year over year due to lower demand in the Industrial segment.
On a regional basis, quarterly sales generated from the Americas decreased 1% year over year. In Europe, the Middle East and Africa, sales decreased 2% year over year. Sales from the Asia Pacific decreased 10% year over year.
Net sales in the Industrial segment totaled $165.7 million (contributing to 30.2% of the quarter’s sales), which decreased 14% year over year. Forex woes lowered sales by 1% year over year.
Net sales in the Process segment grossed $136.1 million (contributing to 24.8% of the quarter’s sales), flat year over year. Core sales remained flat on a year-over-year basis.
Net sales in the Contractor segment totaled $246.9 million (contributing to 45% of the quarter’s sales), up 3% year over year. However, Core sales decreased 3%.
In the fourth quarter, Graco’s cost of sales increased 1% year over year to $269.4 million. Gross profit decreased 7% to $279.3 million and the margin declined two percentage points. Lower sales volume and higher product costs ailed the margin’s performance.
Operating income decreased 23% year over year to $130.0 million. The operating margin decreased 6.3 percentage points from the year-ago quarter. Interest expenses totaled $0.8 million compared with $0.7 million in the previous year’s quarter. The adjusted effective tax rate was 22% compared with the year-ago quarter’s 20%.
Exiting the fourth quarter, Graco had cash and cash equivalents of $675.3 million compared with $538 million at the end of 2023.
It generated net cash of $621.7 million from operating activities in 2024 compared with $651 million in the year-ago period. Capital used for purchasing property, plant and equipment totaled $106.7 million compared with $184.8 million in the year-ago period.
Graco paid out dividends worth $172.1 million to its shareholders in the year, up 8.7% from the previous year. It repurchased shares worth $31.4 million in the same period.
The company expects organic net sales to increase in the low single-digits on a constant-currency basis in 2025.
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Graco has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, 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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This article originally published on Zacks Investment Research (zacks.com).
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