Graco Inc. GGG has been benefiting from improving order rates, product innovations and accretive acquisitions. The company's efforts to reward its shareholders handsomely add to its appeal.

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 for multiple component materials that demand precise ratio control. 

Shares of this Zacks Rank #3 (Hold) company rose 0.1% in the year-to-date period against the industry‘s 2.2% decline.

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Let’s discuss the factors that should influence investors to retain the stock for the time being.

Growth Catalysts of GGG

Product Innovation: New product launches and improvement of the existing ones are aiding Graco’s performance. The company introduced the PowerShot XT electronic-powered airless paint gun, Stellair ACE and Stellair and E-Mix XT in 2024. In 2023, GGG introduced InvisiPac HM10, a hot melt adhesive dispense system, an electric-powered airless gun and Ultra QuickShot, a battery-powered airless paint sprayer. 

The company also introduced the ES 500 Stencil rig, LineLazer ES 500 electric battery-powered airless striper, Contractor King air-powered protective coatings sprayer and Silver Plus HP spray guns. In 2024, it spent $87.2 million on product development. Improving order rates, coupled with product introductions, are expected to drive its performance in the upcoming quarters.

Acquisitions: Graco has been strengthening its business through acquisitions. In November 2024, the company acquired Corob S.p.A. (Corob), which has been added to its Contractor segment. The inclusion of Corob’s strong product line, supported by its solid design and manufacturing capabilities, will enable GGG to expand its customer offerings and boost its position in the paint and coating machinery manufacturing market. In August 2024, the company completed the acquisition of PCT System. The buyout enabled Graco to boost its White Knight business and will help it expand its presence in the semiconductor market.

Rewards to Shareholders: Graco continues to increase shareholders’ value through dividend payments and share repurchases. In 2024, GGG paid out dividends worth $172.1 million to its shareholders, reflecting an increase of 8.7% year over year. Graco repurchased shares worth $31.4 million in 2024. In December 2024, the company hiked its quarterly dividend by 7.8% to 27.5 cents per share.

Headwinds for GGG

Business Weakness: Softness in the Industrial segment, due to lower demand for sealants and adhesive products in the China region, is concerning for GGG. A decrease in demand for the company’s semiconductor products in the EMEA and Asia Pacific regions, owing to a weakness in the industrial sector, is also hampering the Process segment’s performance. The Contractor segment is experiencing weakness due to softness in the U.S. housing and remodeling markets.

High Costs: The company has been dealing with the adverse impacts of high selling, marketing and distribution costs. GGG’s selling, marketing and distribution costs, and general and administrative expenses increased 5% and 11.6%, respectively, year over year in 2024. The metrics, as a percentage of net sales, increased 110 and 130 basis points year over year, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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