Graco Inc.’s GGG financial stability is challenged by weakness in the Industrial and Process segments. Elevated costs are putting a strain on the bottom line.

Headquartered in Minneapolis, MN, Graco engages in designing, manufacturing and marketing equipment and systems used to measure, move, control, spray and dispense fluid as well as powder materials. The company offers equipment solutions for tough-to-handle materials with high viscosities, abrasive or corrosive properties and multiple component materials that demand precise ratio control.

GGG currently carries a Zacks Rank #4 (Sell). In the past year, the stock has gained 11.2% compared with the industry’s 32.8% growth.

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Business Weakness: Graco is experiencing softness in the Industrial segment, due to decline in finishing system sales in the Asia-Pacific region. A decrease in demand for the company’s semiconductor, industrial lubrication and process transfer equipment products owing to a weakness in the industrial sector is hampering the Process segment’s performance. The company expects organic net sales to decline in low single-digit on a constant-currency basis for 2024.

High Costs:  Rising costs pose a threat to the company’s bottom line. In 2023, Graco’s selling, marketing and distribution costs increased 3.9% from the year-ago period. General and administrative expenses jumped 11.5% in the same period.  Operating expenses increased 6% in 2023 due to incremental share-based compensation and increased spending on product development. The trend continued in the first nine months of 2024, with selling, marketing and distribution costs, and general and administrative expenses increasing 3.4% and 6.3%, respectively, year over year. The metrics, as a percentage of net sales, increased 90 basis points each, year over year.

Forex Woes: Graco has operations in multiple nations. International expansion exposes it to risks arising from unfavorable movement in foreign currencies, geopolitical issues and other headwinds. In the first nine months of 2024, foreign currency translation had a negative impact of 1% on the Asia Pacific region’s revenues.

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Graco Inc. (GGG) : Free Stock Analysis Report

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