Graco Inc. Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
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Invest better with AI
StocksGuide Unlimited – full access to AI analyses
👉 More detailed insights
👉 Exclusive perspectives on opportunities & risks
👉 Clear answers to your questions
Invest better with AI
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👉 More detailed insights
👉 Exclusive perspectives on opportunities & risks
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $12.67b | Revenue (TTM) = $2.27b
Market Cap = $12.67b | Estimated Revenue = $2.38b
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $12.19b | Revenue (TTM) = $2.27b
Enterprise Value = $12.19b | Forward Revenue = $2.38b
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🧮 Calculation
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net Margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
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- A high revenue per employee indicates a scalable and margin-strong business model.
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Graco Inc. Stock Analysis
Analyst Opinions
16 Analysts have issued a Graco Inc. forecast:
Analyst Opinions
16 Analysts have issued a Graco Inc. forecast:
Graco Inc. Events
Past Events
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JUL
23
Q2 2026 Earnings Call
2 months ago
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APR
23
Q1 2026 Earnings Call
5 months ago
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JAN
27
Q4 2025 Earnings Call
8 months ago
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OCT
23
Q3 2025 Earnings Call
11 months ago
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StocksGuide Free
Graco Inc. — Q2 2026 Earnings Call
1. Management Discussion
Good morning, and welcome to the second quarter conference call for Graco Inc. If you wish to access the replay for this call, you may do so by visiting the company website at www.graco.com. Graco has additional information available in a PowerPoint slide presentation, which is available as part of the webcast player. At the request of the company, we will open the conference up for questions and answers after opening remarks from management, I will now hand the conference over to John Bower, Director of Investor Relations. John, please go ahead.
Good morning. I'm here with Mark Sheahan, our President and Chief Executive Officer; Sanjiv Gupta, Chief Financial Officer and Treasurer; and Chris Knutson, Vice President, Chief Accounting Officer and Controller. We welcome you to our conference call to report Graco's fiscal 2026 second quarter results. Before we begin, I'd like to remind everyone that certain statements made during this call may be forward-looking and are subject to risks and uncertainties. Please refer to the safe harbor statement included in our earnings release and earnings presentation as well as our SEC filings for additional information regarding these risks and uncertainties. I will now turn the conference over to Mark Sheahan.
Thank you, John. Good morning, everyone. We delivered record second quarter sales of $591 million and record second quarter earnings, reflecting growth across all 3 segments and margin expansion supported by disciplined expense management and operational execution.
Contractor generated organic growth in the Americas, led by Home Center and Professional Paint. Industrial benefited from broad-based activity across core markets, while Expansion Markets continue to see strong semiconductor demand. Organic orders increased 5% during the quarter. The most recent 6-week booking average was up 14% versus last year and backlog as of July 17, excluding acquisitions, was up $57 million or 28% from the beginning of the year.
Together, these positive trends give us confidence in a stronger second half. Capital allocation remains an important part of how we create long-term shareholder value. In May, we announced the acquisition of Valco Melton, one of Graco's largest acquisitions in more than a decade. Valco Melton is an attractive strategic fit that adds complementary technology, products and customer relationships in the high-growing packaging dispense market.
We expect to create additional value by applying Graco's manufacturing expertise, operating discipline and global reach to improve profitability over time, following a playbook already underway with COROB, Color Service and Radia. At the same time, we continue to be active in evaluating additional M&A opportunities. Our strong cash position and balance sheet provide the flexibility to invest in businesses, pursue strategic acquisition and return capital to shareholders.
Turning to some of the segment performance. The Contractor segment delivered record sales and earnings in the quarter. Revenue increased 4% and organic sales were higher across both Paint and Home Center markets in the Americas for the first time in nearly 2 years. We saw greater stability across many of our core markets during the quarter, supported by improved North America activity in residential repaint and remodel projects, sell-through trends across the channel, stronger customer engagement, improved execution and targeted commercial programs.
We also continue to see good demand in protective coatings and foam, which represent a more global and application-driven part of the Contractor business. These areas continue to benefit from commercial construction, infrastructure and Industrial project activity, including investments tied to data centers, energy and manufacturing.
The strength in these applications highlights the breadth of the Contractor segment and our ability to serve customers beyond traditional residential paint. Innovation is an important way that we support customers and differentiate our offerings in the contractor business. New product introductions, including the next generation of QuickShot, the ProReach extension system and new autonomous and semi-autonomous striping solutions are designed to improve productivity, reduce labor requirements, minimize material waste and help customers deliver more consistent, high-quality results.
Together, these factors helped drive 4% organic bookings growth in the quarter with the most recent 6-week order trends improving to 14% growth over last year. In the Industrial segment, sales increased 3% in the quarter, reflecting better activity across process manufacturing, machinery manufacturing, general Industrial applications, semiconductor-related investment and continued adoption of electrified product platforms.
These trends reflect customer investment in productivity, automation and infrastructure projects. Additionally, we're seeing benefit from a more coordinated commercial approach that helps teams focus execution on larger opportunities and gain specifications with OEMs. Beyond these larger investment-driven markets, we also saw healthy demand in day-to-day Industrial applications, including MRO channels.
The quarter also reflected a few anticipated headwinds. Organic powder finishing systems were lower due to the timing of order acceptance, which should occur in the second half of the year. In Asia, activity was slower to start the year with China specifically affected by prior year pull-forward activity ahead of tariff-related pricing actions and a softer automotive demand.
Organic orders improved throughout the quarter with bookings increasing 3% year-to-date through July 17 and 11% over the most recent 6-week period versus the prior year. Combined with a healthy backlog, these trends support our expectation for stronger performance in the second half of the year for Industrial. Expansion markets grew 3% with growth across all key businesses. Semiconductor continues to have a strong year, particularly in Asia Pacific, supported by ongoing investment in semiconductor manufacturing capacity.
Bookings increased 58% in the quarter, bringing year-to-date bookings growth to 33% with the most recent 6-week average up 36% and backlogs remain strong. Overall, Graco's growth in the quarter came from multiple end markets, products and geographies. It was supported by improving customer activity, focused investments in attractive markets and the advantages of a diversified portfolio. These factors continue to guide our decisions and position us for long-term value creation.
Moving on to our outlook. Looking ahead, we're encouraged by the improving trends we're seeing across Graco's business segments. New product introductions and strong channel initiatives support second half performance, while our teams remain focused on the actions to capture opportunities and drive growth. We're maintaining our full year outlook and initiating a third quarter revenue guide of $580 million to $600 million, excluding Valco Melton, which is expected to close during the third quarter. Overall, our strategy remains consistent. We're building a broader growth platform through innovation, disciplined capital allocation and targeted acquisitions while staying focused on the highest return opportunities to drive our long-term success. With that, I'll turn the call over to Sanjiv to provide more detail on our financial results for the quarter.
Thank you, Mark, and good morning, everyone. We reported second quarter sales of $591 million, an increase of 3% from last year. Acquisitions contributed 3% growth, and currency translation added 1%, partially offset by 1% unfavorable change in organic sales, driven primarily by timing of Finishing Systems revenue within the Industrial segment.
We delivered another quarter of strong earnings performance. Reported net earnings were $145 million or $0.87 per diluted share, an increase of 14% from the prior year. On an adjusted basis, excluding acquisition-related costs, amortization of acquired intangible assets and certain tax items, adjusted earnings per share were $0.91, up 17% year-over-year. Gross margin increased 130 basis points from the prior year. The improvement reflects price realization, improved manufacturing performance and the favorable impact of $9 million in tariff refunds net of related surcharges.
While the tariff refunds provided a meaningful benefit, margin improvement was also supported by the fundamentals of our operating model and disciplined cost management across the organization. Operating expenses were essentially flat in the quarter despite inflationary pressures and the addition of acquired businesses, reflecting continued cost management, which drove an operating earnings increase of 11% and an operating margin rate of 30% of sales compared to 26% in the prior year quarter.
Across the portfolio, segment profitability remained strong. Contractor and Expansion Market expanded margins, while Industrial maintains its profitability, although project timing impacted revenue.
Turning to cash flow and capital allocation. We generated $298 million of operating cash flow through the first 6 months of the year, representing strong conversion of earnings into cash and continuing our long track record of strong cash generation.
We remain committed to our balanced capital allocation framework. In the first half of the year, we repurchased 4.2 million shares totaling approximately $331 million, paid $98 million in dividends and invested $29 million in capital expenditure, including strategic facility expansion projects.
We continue to have significant flexibility to invest in growth while returning capital to shareholders. As we look ahead, at current exchange rates, currency is expected to provide approximately a 1% favorable impact on both full year sales and earnings. We now expect unallocated corporate expenses to be $39 million to $42 million, capital expenditures of $90 million to $100 million and an adjusted effective tax rate of 20% to 21% for the full year.
In summary, the quarter demonstrated the strength of our operating model, delivering double-digit earnings growth, significant margin expansion, strong cash generation and continued disciplined capital allocation. Positive order trends and backlog growth during the quarter further support our confidence in the underlying health of the business. That concludes our prepared remarks. Operator, we are ready for the questions.
[Operator Instructions] Our first question comes from Deane Dray of RBC.
2. Question Answer
Can we start with the -- and I guess I want to call it a momentous decision to give quarterly sales guidance. So it begs the question to why now? Obviously, you've got better visibility. You got backlog up 28%. The 6-week orders look strong. Expansion markets are living up to their name. So just kind of take us through your decision to give this guidance metric? And should we expect this on a go-forward basis?
Yes, it's a good question. And I think you really answered the question with your commentary. We do have pretty good visibility, particularly over a 13-week time period. And we thought it would be helpful to the analysts like you that follow the company to get our perspective on how these quarters are actually playing out because -- for example, if you look at this year, we haven't changed our revenue outlook for the full year. And there's some volatility around the first half versus second half that we -- if we had done a different job, we might have given you some more information about how we saw those 2 halves playing out and been a little bit more insightful in terms of the information that we're providing to the analysts and actually have to put reports out and give numbers and represent the company that way.
So I think that we feel comfortable. I think that, as you said, backlogs are strong. I think this is a change that we're committing to make going forward. So it's not just a 1 quarter thing that we're going to do. And I think it's the right approach for the company at this time.
Great. Well, we welcome that. And I think the last time I was surprised at this level was when you all had to make a second price increase midyear, which is just not something you typically did. But that begs the question. Can you talk about pricing in the quarter, where you are on price cost and just kind of the outlook there?
Yes. So Deane, so the price/cost is positive. I think our plan here is given that our price/cost equation is positive, we are going to stick to our historic price cadence, which is basically we'll be introducing the price increases at the beginning of the year. So that's the plan. And that's what we're going to stick to. We have revised pricing this year, roughly 1.5% to 2%, consistent with how we have been doing historically. So...
Yes, I think we're in good shape, Deane. Of course, we always have the flexibility if we need to do something, we can. But right now, things look pretty good.
Our next question comes from Mike Halloran of Baird.
So, like Deane, I appreciate the 3Q help. What I'm looking for more holistically is just translating how you're talking about the bookings in the front half of the year, last 6 weeks, however you want to put it, in the back half of the year and just how that relationship in your mind works out.
Obviously, back half of the year implies something above 5%, depending on what your definition of low single digit is from an organic growth perspective. Orders front half of the year were -- particularly in 2Q were kind of there in full year. And so what's the correlation, the lag? How much revenue do you think is getting pushed to the back half of the year? How much of this is just sequential momentum that you expect to continue in the back half of the year? So just any help you can give on that relationship and why the visibility is higher and all those factors?
Yes, I'll start, and I'll let these guys chime in. I may not cover everything. But if I were to play back Q1, I think we had a decent Q1. We just built backlog. We weren't able to ship it out. And so we had a I think an organic decline of about 6%. But if you had kind of -- if we had gotten the product out and the backlog hadn't grown, it would have been a much different story.
In Q2, we built even more backlog, but we were able to push through enough orders to generate closer to a flattish organic growth number. We benefited, obviously, from acquisitions as well. I think year-to-date, our backlogs are up $57 million from the beginning of the year. So that gives us a lot of momentum heading into the back half.
We had quite a bit of headwind in the powder coatings business, the Gema business in the first half. We knew that. They had a great first half last year, and we think that their comps are going to be easier in the back half, but they've also gotten nice benefit from the Color Service acquisition, which is actually performing ahead of our plan and our schedule. So that's a factor that goes into the equation because that will become organic here in the third quarter for us.
And I would say probably the biggest positive in my mind that we've seen in the more recent numbers is the momentum that we're seeing on the contractor side of the business. While we did expect that we would see some positivity there, just the broad-based nature of it, the fact that it's happening in North America, which is our biggest market, the infrastructure spending that they're getting involved with from the protective coatings and foam side of the business are really nice things that have happened since the end of the first quarter.
And I think that you combine that with the backlogs, the Gema numbers, the big growth that we're seeing in semiconductor with our white knight business, that really gives us confidence that we are going to be able to hit the full year revenue guide that we put out at the beginning of January. It's just that we'll definitely be more back half loaded. So I don't know if I answered your question enough specifically, but I welcome the group here to chime in if there's anything else that you guys want to add. They're shaking their heads.
No, all good. That helps. And then maybe the follow-up is something you alluded to there, which is, I think people historically think about Graco more as a traditional res and to a lesser extent, non-res exposed company. But what you were referencing is exposure to broader build-out that's happening through the ecosystem, the large CapEx dollars out there. You can see that in the expansionary numbers, the semiconductor growth.
Maybe talk to how aggressively you think that you're participating or what kind of impact it can have on the other 2 segments, all else equal? In other words, if this contagion kind of rolls through spend through the economy, are we just under-appreciating how much Graco can participate in that?
Yes. I don't know. I think that there's different ways that we can participate. Obviously, semiconductor is probably the cleanest area where we can talk about it because we have a specific business that's dedicated there. And of course, they're benefiting from this build-out that's happening. They're more involved with the tool manufacturing of the equipment that's used to manufacture the chips, but there's definitely some uptick there that you're seeing in our business.
When it comes to the data centers themselves, I mean, there's sort of the outside of the building stuff, which is anything to do with putting up the building itself, putting roofs on the building, even like parking lots and stuff like that, we get involved with all of those activities. Our Gema powder business gets involved in some of the applications with respect to the transfer equipment that's put in. They have powder coating systems that coat the cabinets that go in to power these things, and they've seen an uptick in their business there.
In our Industrial business, we have equipment that applies these thermal interface materials, which are really kind of a fancy way of saying materials that they kind of dissipate the heat that's involved in a lot of the activities in a data center. And so our channel partners, our distributors are really starting to see some activity around there where we're taking Graco applications and really using our thermal interface dispense materials in areas like the cabinets that are put into data centers, some of the chips that are being produced. Traditionally, we've kind of participated in them like cell phones and personal items, but now starting to broaden out a little bit into commercial applications. So we touch it in a lot of ways. And I think it's -- net-net, it's a positive compared to what we may have seen a year or 2 ago.
Our next question is from Bryan Blair of Oppenheimer.
Circling back to the momentous decision to provide the quarterly guide, quarterly sales guide. I agree with that characterization. I was hoping you could provide a little more detail by segment, what your team is contemplating for the third quarter. And then obviously, we can back into what's been implied for Q4 as well.
Yes. I think for now, we're just given the overall number, and it includes M&A in that number. We haven't really broken it out by segment. Of course, we have our own thoughts around that. But I think that at this point, I don't know that we're prepared to give segment information, I'll throw it over to Sanjiv. And I think that being a new CFO, this was something that he thought was important that we do. And part of this, too, Bryan, is when you put a number out there, it creates a little bit of accountability for our team. And so you can believe that we're having those discussions, and we're building that muscle as well. But I'll let Sanjiv just comment on his thoughts.
I think, Mark, you captured it. I would say this is our first step. We are starting off with a consolidated number. We'll have to really make sure that internally, we have the processes and checks and balances in terms of how we develop that number. We do have an internal forecast, but I think we are not ready to really go at that level of detail yet. Again, it's a start. Let us give us some time, and then we'll come back to you.
Okay. Understood. It's our job to ask for more. And Valco Melton sounds like a very very high-set acquisition for your team. So kudos there. You provided the starting EBITDA margin of around 20%. I guess to level set as we think about the prospective levers to the deal model, what's run rate gross margin? And then with regard to the 27 facility footprint, what's the breakout between manufacturing, sales and service locations?
Yes. So the gross margins of that business are 50% or more. So they're good. And I think we also flagged that more than half of the business is parts and accessories, which is really good. So when you start with a high-quality business with good gross margins like that, it does give you some opportunities to drive some value on the operating side. A lot of that will come with revenue growth, but also we and the Valco team when we get together with them, have really kind of identified some areas that we think we can help them in to be more efficient, more productive and hopefully drive some of those costs out as the revenue grows.
I mean, for sure, job 1 for us is to maintain the revenue that they have and have it continue to grow at the rate that it has. It's been growing very nicely. We certainly didn't build that into the deal model. But our expectation is that this is a nice market. They're doing well. They are one of the major players here. This is a business that I personally have wanted in the Graco portfolio for quite some time. You might recall that in 2013, we launched a product called InvisiPac where we went into this space. We built a nice business there. And we think that they can help us sell more InvisiPac, and I think we can help them as well sell some of the Graco equipment into some of the customers they have that are focused into the corrugated area. So it is a really nice hand-in-glove acquisition that we're excited about. And Bryan, remind me the second part of your question. I don't know if we have detail, but if we do, I'll give it to you.
I was just curious in terms of the 27 facility footprints, how that breaks down between manufacturing, sales and service location.
Bryan, this is Chris. I'm going off the top of my head here, but I think they have about 5 manufacturing locations and the rest are going to be sales and service offices.
Our next question is from Matt Summerville of D.A. Davidson.
Maybe just sticking with the acquisition. That 9% CAGR referenced in the deck, is that all organic? Or is there M&A in there? And if there is M&A, what would the organic number look like? And then does Valco tend to capture the same price goodness that you guys capture on an annual basis? Or is there some commercial opportunity? And then I have a follow-up.
I'll start with that one, Matt. This is Chris. When you're looking at the revenue CAGR, they do -- they have been acquisitive, but their acquisitions have been very -- are much smaller. So that is an organic number, the 9%.
Got it. And then the rest of the question on sort of their ability to capture price and do you underwrite that kind of 9% CAGR going forward?
I think that they have, I'll call it, normal pricing practices. Obviously, they compete against some large other companies in that space. You probably know who they are. They keep each other honest. It's a good, I would call it, a rational pricing environment. I think Valco has done a good job of positioning themselves into some applications where they feel like they can add a lot of value, like in particular, the corrugated packaging market.
And we're not going into this expecting that we're going to do anything dramatically different from a pricing standpoint than what they have done historically. I think a lot of their growth has been mostly products, end market demand, market -- their market position, I think, has improved over that 5-year time period, and we really don't want to do anything to disrupt that momentum that they've got.
And then as a follow-up, just thinking about -- I mean, I'm looking at the bookings, Slide 11. In any period you look at expansion markets bookings are excellent. You mentioned some timing on powder systems and Industrial, which we know can add and has in the past some volatility quarter-to-quarter. As we think about that oncoming expansion markets demand, should we be thinking about a sustained period that this business is growing double digits, number one. And then number two, on Industrial, do those powder projects favor Q3 or Q4 in terms of timing?
Yes. I think that my view of semiconductor is a pretty lumpy end market. You get really hot periods. They tend to run 3-, 5-year time periods and then it can cool off. All signs at this point are this is pretty sustainable and it's going to run for a while. And so I don't -- wouldn't tell you that you should run out those growth rates in perpetuity, obviously, but I do feel pretty confident that customers are interested in our products. They're talking to us all the time. They're placing orders. So in the near term, I think that there's really good momentum.
And it should last for sure, through the end of this year and I would guess into next year as well beyond that. If you look at the macro data with all the build-out that's happening around AI and other things, I think you can get yourself comfortable that this is going to be a multiyear favorable trend for our business, as we continue to evolve and pursue that opportunity.
I think the final part of your question was the timing of the powder. We've historically seen a strong fourth quarter in powder. We expect to see that again this year. Last year, their third quarter was one of their slowest, and we expect -- we've had some slowness to start this year with the timing of the installation and completion of projects. We expect that to pick up in both third and fourth quarter this year.
Our next question comes from Jeff Hammond of KeyBanc Capital Markets.
This is Mitch Moore on for Jeff. My first question, you really stepped into buybacks this quarter and have been doing more M&A recently. I was just wondering if that was purely opportunistic or if moving forward, we should expect a more constructive approach to deploying cash flow and cash on the balance sheet.
I'll let Sanjiv handle the buyback question.
So I think from a capital allocation framework standpoint, I think our strategy or approach hasn't changed. It will be consistent. It will be disciplined. It will be balanced. And that's what we have been doing. And I think as I've stated before, we'll be investing in growth first organically and pursuing the strategic M&A, which we have outlined to you guys as long as they meet our financial and strategic threshold. And then we'll return cash through dividends and share buybacks to the shareholders.
And I think in terms of dividend, we have a very consistent history or approach. We have been returning cash to the shareholders. But in terms of share buyback, it has to be opportunistic, and that's the philosophy we'll continue to pursue. And it is basically based on the financial returns, whether it's the right play and essentially the choice between what other sources, other uses of cash we have. So I think the bottom line is it's the same capital allocation framework, which we have deployed, and we'll continue to look at share buyback opportunities opportunistically.
Yes. And I would just add that, I mean, let's be candid here. I mean, we were at a $95 stock price not that long ago. Our outlook is the same. Cash conversion is great. Business is performing well. So I think we do view the current environment as a buying opportunity for Graco. I think you've seen that here in our actions recently. And then I think the other part of your question was M&A. And again, we -- our long-term view is that we'd like, let's call it, 1/3 of our revenue growth through a cycle to come from acquired businesses. And I think that the pipelines are good. M&A is opportunistic. We obviously have activities going on there all the time. It really depends upon whether it's a good strategic fit, timing of the seller, are we interested at the price that they want to sell it, those kinds of things.
But I think the point is if you were to look out over the next 5 years, we do feel pretty confident that we're going to be able to get that kind of contribution from M&A with our teams as focused on it as they are. And I think we've got a really good story to tell in terms of the companies that we've acquired and how they're contributing to Graco overall today. We want to do more of that.
Great. That's very helpful. And then my second question is just on Contractor. You mentioned, I think it was the first time in 2 years that Pro Paint and Home Center channels grew in the same quarter. And you talked about some of the new product introductions and some of the nonresidential applications. Could you just speak to the confidence that the improvements you've seen this last quarter and then the bookings are kind of sustainable through the year?
Yes. I guess my impression, Mitch, would be that -- and I'm hopeful that we've kind of seen the worst of the market, the macro market conditions that, that business has had to face over the last 4 or 5 years. We're starting to see in our numbers, orders kind of a broad-based pickup versus what we experienced a year ago.
It's still pretty early. So I don't want to get irrationally exuberant, but I do feel better about where that business is positioned today than I have for the last few years. And of course, the products that they're launching, the ones that we mentioned, some of the activities that we have going on within the business unit to really drive brand preference and create more demand from our customers has translated into some growth that we're excited about, and we're kind of hopeful here that we've seen the worst of it and we can grow off of the base that we have. I will say that the COROB acquisition that we did about 18 months ago, again, like the other part of Contractor, we've seen nice order pickup there as well in the last 6 weeks. And so that's a nice profitable business that we expect to get in the back half that we didn't really see a whole lot of in the front half. So feel pretty good about Contractor. I think we're in good shape, and we'll see what happens.
Our next question comes from Walter Liptak of Seaport Research.
I'll do a follow-on first on Contractor. And kind of going to this idea of the data center build-out for nonres construction, are there new products that go into that market? Or are there specific products that you think are being sold for use in data center construction that kind of supports the view that your business is getting a lift from that build-out?
I think it's the same products. I think it's just capitalizing on these opportunities that are out there today that weren't there a year ago. So it's paint, it's protective coatings in some of the areas in the facilities. It's the roofing applications that we get involved with. It's pavement. It's the flooring within the data centers. So all of those construction-type activities that you would expect us to be involved with. We are seeing decent activity there, and the team is doing a good job of capitalizing on it.
Okay. Great. Has there been a way for you guys to quantify the benefit from it? Or is there too much channel in the way to see a direct data center-related sales channel?
Yes, it's not a number I'd be comfortable sharing with you, but our teams have a perspective on it, and we ask for data about actual buildings and construction that they're seeing, and we've got some of that information. But it's -- again, it's not like hundreds of millions of dollars, but it's enough of an uptick for that business where we thought it was worth mentioning. And we do see that activity continuing here in the near term and probably into the next few years as long as data centers continue to be built out.
Okay. Great. And then just kind of -- we're all kind of watching for Industrial and should we continue to see improvement in sort of the general Industrial market, some of the core things like automotive for you guys or just projects, larger projects going through your rep channel.
Are you -- I wonder if you can talk a little bit about the sort of those general Industrial markets. And if some of the recent order growth is a result of better projects getting released? And then maybe are we on easier comps now? Do you think you're gaining from selling strategies? Or are we seeing market growth?
Yes. I'll maybe take the second part first. So for sure, we have easier comps in the powder business in the back half of the year. And really, if you looked at the legacy Graco Industrial business in the first half of the year, we did have growth in that part of our business kind of in line with our low single-digit organic guide that we gave for the full year.
So any of the pressure that you've seen on the organic side here in the first half has really been tied to the powder business, and those comps are going to be easier. I'd characterize the growth is pretty broad-based. I think our -- we're seeing the PMI start to turn positive. So we're seeing investments being made in machinery manufacturing, general Industrial applications, pretty healthy MRO channels as well. So that activity has tweaked up a little bit for us.
And of course, we've been focusing on creating the right digital assets here at Graco to be able to interact with those larger MRO partners. And I think that, that's starting to bear some fruit as well for us. So I would kind of say broad-based across the board, nothing is really spiking it. Tempo feels pretty good here as we're exiting Q2, and we feel, again, fairly confident in that the back half of the year is going to be better than what we saw in the front half of the year.
[Operator Instructions] As there are no further questions, I will now turn the conference over to Mark Sheahan.
Okay. Well, I thank you all for participating in the call today. I look forward to seeing some of you on the road here in the next few months, and I hope you have a great rest of the day. Thanks again.
This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.
Graco Inc. — Q2 2026 Earnings Call
Graco Inc. — Q2 2026 Earnings Call
Record Q2 sales and earnings with margin expansion and strong cash flow; backlog and recent order momentum support a stronger second half.
📊 Quarter at a Glance
- Revenue: $591M (+3% YoY)
- Adjusted EPS: $0.91 (+17% YoY)
- Operating margin: 30% of sales (up from 26% a year ago)
- Gross margin: +130 basis points YoY, aided by price, manufacturing gains and $9M net tariff refunds
- Backlog & cash: Backlog up $57M (28% YTD); YTD operating cash flow $298M
🎯 What Management Says
- M&A focus: Acquired Valco Melton to add complementary dispense technology and packaging customers; plan to apply Graco's manufacturing and global reach to improve profitability.
- Growth through product & channels: New Contractor products (next-gen QuickShot, ProReach, autonomous striping) target productivity gains, waste reduction and expanded nonresidential demand.
- Capital allocation: Maintain disciplined mix of organic investment, targeted acquisitions and shareholder returns; aim for acquisitions to contribute meaningfully to long-term growth.
🔭 Outlook & Guidance
- Q3 guide: Revenue $580M–$600M (excludes Valco Melton; Valco expected to close in Q3)
- Full-year posture: Full-year outlook maintained; management expects stronger second half supported by backlog and order trends.
- Financial assumptions: FX ~+1% FY benefit; unallocated corporate $39M–$42M; capex $90M–$100M; adjusted tax rate 20%–21%
- Risks: Timing of powder finishing system orders, softer China automotive start and project timing could shift revenue between quarters
❓ Analyst Q&A
- Quarterly guidance: Management will now provide quarterly sales guidance going forward, citing 13-week visibility from stronger backlog and recent order momentum.
- Valco detail: Valco Melton reported gross margins >50%, >50% parts/accessories mix and ~5 manufacturing sites of 27 facilities; seen as a high-margin, strategic fit.
- Capital returns vs M&A: Share repurchases remain opportunistic; balanced framework continues—invest organically first, pursue M&A that meets thresholds, return excess cash via buybacks/dividends.
⚡ Bottom Line
- Conclusion: Strong quarter with record sales, double-digit adjusted EPS growth, margin expansion and robust cash conversion; backlog and recent booking momentum support a back-half acceleration, while timing risks in powder systems and Asia warrant caution.
Graco Inc. — Q1 2026 Earnings Call
1. Management Discussion
Good morning, and welcome to the First Quarter Conference Call for Graco Inc. If you wish to access the replay for this call, you may do so by visiting the company's website at www.graco.com.
Graco has additional information available in a PowerPoint slide presentation, which is available as part of the webcast player. [Operator Instructions]
During this call, various remarks may be made by management about their expectations, plans and prospects for the future. These remarks constitute for looking statements for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. Actual results may differ materially from those indicated as a result of various risk factors, including those identified in Item 1A of the company's 2025 annual report on Form 10-K and in Item 1A of the company's most recent quarterly report on Form 10-Q. These reports are available on the company's website at www.graco.com, and the SEC's website at www.sec.gov.
Forward-looking statements reflect management's current views and speak only as of the time they are made. The company undertakes no obligation to update these statements in light of new information or future events.
I will now turn the conference over to Chris Knutson, Vice President, Controller and Chief Accounting Officer.
Good morning, everyone, and thank you for joining the call. I'm here today with Mark Sheahan, David Lowe and Sanjiv Gupta. I'll begin with a brief overview of our first quarter results and then turn the call over to Mark for additional commentary.
Yesterday, Graco reported first quarter sales of $540 million, up 2% from the same quarter last year. Acquisitions contributed 5% growth and currency translation added 3% growth, partially offset by a 6% decline in organic sales. Reported net earnings were $119 million down 5% or $0.70 per diluted share. Excluding excess tax benefits from stock option exercises, adjusted non-GAAP net earnings were $0.66 per diluted share, down 6%. Gross margin decreased 60 basis points versus the first quarter last year. The benefit from our pricing actions helped offset higher product costs from lower factory volume, lower margin rates from acquired operations and incremental tariffs.
Tariffs increased product costs by $7 million in the quarter.
Operating expenses increased $9 million or 7% in the quarter. Excluding $5 million in incremental expenses from acquired operations and the effects of currency translation expenses were flat. In the quarter, the operating margin rate in both our contractor and expansion market segments was 24%, consistent with the same period last year. Industrial segment operating margin was 32%, down from 34% in the prior year quarter. The decline is due primarily to unfavorable volume and tariffs that were not offset by price realization.
Total company knee operating earnings decreased $6 million or 4% in the quarter. Operating earnings as a percentage of sales were 26% compared to 27% in the same period last year. The adjusted effective tax rate was 20%, in line with our expected full year adjusted tax rate of 20% to 21%.
Cash provided by operations totaled $120 million for the year, down $5 million or 4%. Cash provided by operations as a percentage of adjusted net earnings was 107% for the quarter. Year-to-date, uses of cash include share repurchases of 189,000 shares totaling $16 million, dividends of $49 million and capital expenditures of $12 million. These uses were partially offset by share issuances of $40 million.
A few comments as we look forward to the rest of the year. Based on current exchange rates and assuming similar volume, product mix and business mix as in 2025, currency is expected to have a 1% favorable impact on net sales and a 2% favorable impact on net earnings for the full year 2026. For the full year, we continue to expect unallocated corporate expenses of $40 million to $43 million and capital expenditures of $90 million to $100 million, including approximately $50 million for facility expansion projects. 2027 will be a 53-week year with an extra week occurring in the fourth quarter.
And finally, in the attached materials, we updated our outlook slide to highlight performance by segment and region, with the size of each color dot indicating its relative size versus the others.
With that, I'll turn the call over to Mark for more details on our segment and regional performance.
Thank you, Chris. Good morning, everybody. Overall sales increased 2% in the quarter with acquisitions contributing 5% and foreign currency adding another 3%. That growth was partially offset by a 6% decline in organic revenue. Organic revenue started the year slower than expected, particularly in January.
The business activity improved steadily as the quarter progressed, with bookings up 3% at actual currency rates, driving nearly a $26 million increase in backlog, primarily in our Industrial segment. If those orders have been converted to revenue at the end of the quarter, organic revenue at actual currency rates, would have increased 2% and total sales, including acquisitions, would have been up 7%.
The Middle East region represents about $35 million of sales on a full year basis for Graco. To date, we've not seen any significant impact on demand or operations, though the environment remains uncertain. We are staying close to our customers and channel partners and are monitoring order patterns and logistics carefully.
From an exposure standpoint, the Contractor segment will be the most impacted primarily related to our protective coating product application.
Let me provide some additional color on our segments and regions. In the Contractor segment, sales increased 2% in the quarter, with acquisitions and currency translation each contributing 3%, partially offsetting a 4% decline in organic revenue. Within the segment, our form polyurea and protective coatings businesses continued to be bright spots, supported by strong global demand tied to infrastructure, border wall and data center projects.
That said, construction demand remains softer than we would like, particularly in the Americas. Housing starts are expected to be relatively flat year-over-year with fewer new home sales and only modest improvement in existing home sales. Overall, the market has shown limited growth over the past 4 years, and we expect those conditions to persist this year.
Turning to the Industrial segment. Sales increased 4% in the quarter, with acquisitions contributing 8% and currency translation adding another 4%. This growth was partially offset by an 8% decline in organic revenue. Despite the organic decline, bookings were up 5% at actual currency rates, driving a $23 million increase in backlog. If those orders have been converted to revenue within the quarter, organic revenue at actual currency rates would have increased 6%. Industrial Americas performed well delivering revenue growth despite lower project-based activity in our Powder group. Bookings in the region were up double digits, supported by broad-based strength across multiple end markets. EMEA and Asia Pacific were more heavily impacted by the timing of completion and acceptance of project-based activity, which drove the decline in the quarter. That said, both regions saw activity improve as the quarter progressed, with quoting levels moving higher.
In our Expansion Markets segment, organic revenue declined 5% in the quarter, driven primarily by our semiconductor business, which was coming off an exceptionally strong prior year comparison. Semiconductor delivered its largest quarter of the year in 2025, growing 51%. Despite the tough comparison, semiconductor demand remained solid with first quarter bookings up at least 20% in each region. We're also seeing improvement in our environmental business. While the year started slowly, activity has picked up meaningfully with a strong start to the second quarter and bookings are trending positive year-to-date.
Moving on to the outlook. Despite the slow start to the year, we're encouraged by demand trends across our broader end markets. We saw a meaningful pickup in both ordering and porting activity in our industrial and semiconductor businesses throughout the quarter. And based on current order rates, Strength in these areas should help offset continued softness in the Contractor segment. As a result, we're maintaining our 2026 revenue guidance of low single-digit organic growth on a constant currency basis and mid-single-digit growth, including contributions from acquisitions.
Looking ahead, second half comparisons are more favorable, reflecting an easier contractor comparison in the third quarter and the expected timing of project activity in the industrial businesses towards the end of the year.
Finally, I'd like to take a moment to welcome Sanjiv Gupta at Graco. Sanjiv comes from General Motors, where he spent more than 20 years in finance and operating roles across the globe, most recently as CFO of GM International. He brings deep experience across corporate finance, operations, manufacturing and supply chain and a strong track record of leading global teams.
In addition, I want to recognize and thank David Lowe for his more than 30 years of dedicated service as he prepares for retirement. David's leadership deep financial expertise and steady guidance have played an important role in shaping our company and supporting our long-term success. On behalf of the entire organization, I want to thank David for his many contributions and wish him the best in his next chapter.
In closing, I want to take a moment to recognize an important milestone for our company. On April 26, we will celebrate our centennial. This milestone reflects the strength of our people, the durability of our business model and the deep relationships we've built with customers and partners around the world. While we're proud of our history, this anniversary is really about the future, continuing to invest in innovation, supporting our customers and building on the foundation that has sustained the company for a century.
That concludes the prepared remarks. Operator, we'll open it up for questions.
[Operator Instructions] Our first question comes from Deane Dray of RBC Capital Markets.
2. Question Answer
Thank you. Good morning, everyone. Can I add my welcome to Sanjiv and to wish David all the best. Since we're in kind of an uncertain macro here, Mark, maybe you can just kind of take us through the major verticals and kind of what surprised you versus expectations? I know housing remains tough, but semiconductor looks like that's a positive side. And then just same thing on the geographies. And if you could elaborate a bit more on the Middle East exposure for contractor.
Yes. I guess I'd start at a high level and just say that our industrial bookings in the quarter were actually up mid-single digits, which was good. And unfortunately, we weren't able to convert that into revenue that you all saw. But in terms of how that mid-single-digit booking growth took place. It was really across multiple product categories, look at finishing process, our lubrication businesses, both ALE, automatic lubrication as well as our vehicle service business and a little bit of pressure in our sealant and adhesive business offset some of that. But overall, I was pretty happy with the growth in industrial in the quarter. .
The powder business, again, was influenced mostly by some project activity on the bookings front that booked right at the end of the quarter that we just couldn't convert. Now those projects usually take time between booking and billing. And then the overall game of powder business, again, in aggregate was in line with our long-term expectation for the full year of kind of the low single-digit organic growth, constant currency.
Obviously, the home center and the paint channel continue to be a little bit of a headwind for us. I wouldn't characterize them as down significantly, but they were down in the quarter. We did see nice growth in the areas that I mentioned in my script on the high-performance coatings and foam business that wasn't quite enough to offset all of the headwinds that we had in the traditional paint and home center channels. But overall, booking for the quarter was only down 1%, which is okay in an environment where we're still experiencing some pain.
When it came to the environmental business, yes, the bookings and semiconductor were fantastic. We're starting to see a little bit of a pickup on our environmental business. And I would say that the HIP high-pressure business that's in there as well is also experiencing kind of growth within line of what we're expecting for the full year.
Geographically, you've seen the numbers, but Europe is doing okay. Asia is somewhat influenced by the adhesive business that I referenced Previously, on the industrial side, we're off to a bit of a slower start, but the team is pretty optimistic that we'll be able to make that up as we finish out the next 3 quarters of the year.
And North America has been okay here so far this year, where booking rates are up kind of in our low single digit -- low to mid-single-digit guide.
So all in all, I wish we would have been able to convert more of the bookings into billings. It's only 13 weeks, and we do feel like we've got -- given the order momentum that we've got a good chance to be able to get to our low single-digit guide for the full year.
Great. And then just if you could follow up with any specifics around the Middle East exposure, you called out contractor. And then I'll give you my follow-up question. Just you said tariffs were a $7 million bad guy for the quarter. Can you talk about pricing? How much price action have you taken? And is this a potential year of a second price increase what's your crystal ball say?
Yes. So I'll handle the Middle East and give just a quick thing on the tariffs, but I welcome my colleagues here to chime in on those as well. Middle East has not been a problem for us so far. As I said, we're kind of monitoring the situation. We don't have any hung up orders or anything like that, that we're really that concerned about. Maybe the bigger concern would be with respect to if this blockade extends for a longer period of time, it will create some pressure with respect to the materials that we move.
So you think about paints, adhesives, those are materials that require quite a bit of petroleum-based products. And to the extent that there is pressure there and those products increase in cost to consumers, et cetera, that may eventually make its way into our business right now, we're not that worried about it. My personal belief is that things will get cleaned up and we'll be able to move forward. But that's probably the bigger unknown risk for Graco and every other company that's out there moving those kinds of materials, at least here in the short term.
On the tariff front, I would say, overall, we're doing a good job. I think we've really offset the cost pressures that we've seen in the P&L from input costs so far year-to-date. And really, the pressure that we saw in the gross margin line in the quarter was really in a couple of areas. One, obviously, volume, running a little bit below what we were planning for, really due to the cadence of the orders coming in at a softer pace at the beginning of the quarter versus what we saw sort of at the end of the quarter. Our pricing actions are really offsetting a lot of that activity that we've had.
I also point out that the mix in the quarter, the mix of the products that came in was a little bit unfavorable for us as well. So I really have no concerns on the gross margin line for the rest of the year. I think the teams are doing a great job managing operating expenses, which are actually flat to down slightly in the quarter. So we're managing the P&L appropriately given the level of business that we had in Q1. Any other comments from you guys?
Well, on the pricing side, I think that we have -- the way that we are looking at it, we have covered tariff costs, and there have been some volume-related some volume-related things that made that a little less effective. But we have for the -- in most of our businesses beginning last year we were -- we have been pursuing around the world our annual pricing adjustment drumbeat. In fact, we started a little earlier in the regions than we would ordinarily -- the -- here in North America, we have a handful of key channel partners that we have agreed to pricing adjustments that are going to begin to become call it, live early or sometime in Q2. So we're feeling really good about the implications of what those can also help us with as we get through the balance of the year.
Our next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. .
This is Mitch Moore on for Jeff. Just on the low single-digit organic guide, just maybe with the start -- with the slower start of the year, I think it implies mid-single digit-ish growth through the remainder of the year. Could you just help us frame the segment level building blocks to get you there? And what's giving you confidence in that outlook?
Yes. If I had to point to one thing, I'd say we're up low single digit on our bookings for the first quarter. So I think our bookings rate lines up with what the guide was -- and so that gives us the confidence that we're going to be able to get within that guided range when we look out through the whole year. I don't know if you guys have any other comments you want to make.
I'll also say that, as Mark mentioned, the backlog build in the quarter, but -- also subsequent to the end of the quarter into April here, we've also seen another $21 million build in the backlog. So the order rates are there to support it. It might be a little bit lumpier on a quarter-by-quarter basis, but we have confidence we'll get there by the end of the year.
Okay. Great. And then just for my follow-up. I know we touched on tariffs a bit, but just -- is there any update you guys can provide with the updates to the Section 232 tariffs and if that changes your expectations for price costs for the year?
I will say that the change with the 232, where they're moving from a direct aluminum and steel to the full component. We're still working on assessing how much that's going to impact us. We do have some highly manufactured equipment. So when you switch to a full value of the imported goods, it would imply a higher tariff. But for us, a lot of our stuff is already manufactured here. So a lot of the import of the aluminum and steel is typically in its raw form.
Our next question comes from Bryan Blair of Oppenheimer.
Thank you. Good morning, everyone. Welcome, Sanjiv. And congratulations, David, I think you ended up a little short of Dale's tenure, but a great run nonetheless. .
Hey, I can stay at -- maybe, consider staying another 18 years.
All right. I would like to follow up on the backlog expansion in Q1 and then Q2 to date. -- just to level set, how much of the total build has been your Game business? Have there been project argument deferrals? Or is this strictly a matter of order timing -- and is this type of backlog build or the magnitude of it significantly out of the ordinary for the early part of the year?
Yes. I think that they're pretty similar. I think if I look across the legacy Graco Industrial businesses and the backlog that we've built there as well as the backlog that we built in the game business, including projects, et cetera, I didn't see anything jump off the page at me that says that they're heavily weighted toward the powder business. I think it's generally pretty consistent across both those segments.
And I would add, especially the orders that we've seen since the close of the quarter, it's been quite balanced in the -- to use our internal terminology, the Industrial division, which is the legacy Graco the original legacy Graco plus the game of business. As part of this exercise, we ran some stress tests -- and being an old sales guy, I kicked the tires pretty hard on not just the industrial side but also on the contractor side. And I kept -- I kept coming to the same place that given the level of activity we're seeing in industrial and not really relying on a meaningful uptick in contractor low single digit is achievable. .
Okay. I appreciate the color. And following up on the revised tariff framework again, just to level set, is there a meaningful assumed change in net cost impact for your operations? And perhaps more importantly, as a largely domestic manufacturer, do you see any incremental competitive advantages or opportunities under the new structure?
Yes, I don't think there's any obvious competitive advantages. And the way I'm thinking about the tariffs here short term and long term. The big question is, I think, at a stick. Are we going to have -- the tariffs that are in place today, obviously, the Supreme Court ruled the way they did, but they put in new tariffs. So -- when you look at -- if they stick incrementally, it's not going to have a big impact to Graco in terms of the absolute level that we're paying.
I will note, and we did talk about this, we will be applying for our tariff refunds like every other company. And as those come in, we -- our intention would be to highlight those in results so that you know what they are as they come in. At this point, until we actually see the refunds, we're not really going to talk about the levels or the amounts or anything like that. So I think from a modeling perspective, it would probably make some sense just to leave them out. And when they come in, we'll break them out and then you can now they are.
But to answer your question again, to reiterate, when you just think about the absolute level of tariff that this company is incurring, when the new structure that's in place, it's pretty similar to what we experienced before the new structure was put in place.
Our next question comes from Matt Summerville of D.A. Davidson.
Maybe just a minute on contractor. Can you talk about what kind of sell-in, sell-through trends you're seeing in both the home center and propane channel? And then can you also talk about how we should be thinking about the new product load-in this year maybe relative to last? And then I have a follow-up.
Yes. In terms of sell-in, sell-through, there's not a big difference. I think most of the channel partners that we do business with have been pretty careful with their inventory. And I think that they're continuing to be careful with their inventory. So I would characterize our sales and our bookings to be really pretty similar to what they're experiencing out the door. -- basis, which I think makes sense given the environment that they're playing in.
We do have, as every year, products that we're launching and we're planning to launch products here in Q2. I would not be baking in any large incremental increase compared to last year. I think it's a fairly stable, fairly similar new product launch here for the contractor business, what we've experienced in the past. We've got a couple of things that we're excited about for sure that we can talk about after they're actually launched. But again, I think it will be kind of a similar year to what we saw in '25. David, if you got any...
Yes. I -- just a coincidence, I had a conversation with commercial management earlier this morning. And just to underline 2 of Mark's points. On the home center side, the positive side of the story is the foot traffic has not deteriorated year-over-year. And the -- although it still remains off the record levels that we saw in '20 and '21 and such. So there's an opportunity for recovery there.
Those channel partners do, I would say, a very good job managing their working capital, and we feel pretty good the inventory level there is satisfactory.
On the paint store side, always of interest to us. I think the key point there is we feel -- on the -- I'd say at the ground level of the business, our commercial team indicates that the sell-through has been satisfactory. And so that in that really important space for us, call it, the retail demand is pretty -- is also pretty close to the wholesale, which is important, especially as we get some of these new products launched to that channel. And so I think that the -- where we are at vis-a-vis our partners is they're ready to go and ready to order when they see retail demand out the door demand increase .
Got it. And then as a follow-up, maybe can you guys comment on how you're thinking about the M&A outlook, funnel actionability to the funnel depth, if you will, and where you may be seeing most activity?
Yes, I'd characterize the market is still pretty favorable. I think that there's properties out there that we're interested in. Our pipelines are well populated. We're having discussions with a lot of different companies. I do think there's been over the last year or so, a renewed appetite on the part of sellers to take a look at opportunities to realize value and they're looking at strategic buyers in a lot of cases. And -- we're going to remain active. We like businesses that -- where we can add value.
I see a fair amount of opportunities within the Industrial segment, in particular. -- contractor also has a couple of things, but there's probably more lively stuff in the industrial side right now. Interestingly, I did go back and I looked at some information back from 2012 until the end of last year and 2012 was the year that we acquired Gema. About 30% of Graco's revenue that we finished the year with in 2025 is acquired businesses. So we have had a pretty good track record of acquiring businesses, integrating them, maintaining and improving our profitability over that time horizon. And that's really what we're trying to do with our M&A growth going forward.
We have a target long term, 10% top line growth, 1/3 coming from M&A. And if you look back historically, we've been able to do that. So we're proud. The teams are doing a good job and hopefully, we get some more opportunities here as we finish out the year.
Our next question comes from Brad Hewitt of Wolfe Research.
So at the gross margin line, it looks like incrementals were about 25% in the quarter. Should we think about that year-over-year margin pressure is largely driven by a pension price cost? Or are there any other factors you would highlight there?
I think it's mostly mix and a little bit on the volume side. But Chris, if you could probably give more color on that.
It was mixed volume and acquired businesses that really impacted for the quarter Price cost was not a headwind outside of having lower factory volume to absorb the overhead. .
Okay. Great. And then maybe switching over to the backlog side of things. Just curious if you can elaborate a little bit more on visibility of kind of expected backlog conversion as it relates to the rest of the year? And do you see any risk of project cancellations or maybe slippage of backlog conversion into next year?
Yes, I don't think we see any risk at this point. It's always there, but it couldn't happen, but nothing that we're concerned about on stuff that we've already booked and they're in our backlog. And I think that we said in Chris' comments that we expect most of that will convert in the second half of the year. It's hard sometimes to know the exact timing, but this is not something that we're going to keep on the books for more than that period of time.
Yes. The risk of -- Mark is right. The risk cancellation, be it in our legacy business or in even our game business. with their direct system sales activity in my experience is quite low. In the legacy business, typically, -- our stuff is among -- I'm thinking of an industrial implication for sealant equipment or for something in the paint shop. Our stuff is some of the last that is actually ordered in a project. And -- so for example, the expansion of a paint line. I mean, we're literally being dropped in a month or 2 before it's going to be commissioned and come on stream. So things that we have in our pipeline in that business is quite tangible and rarely is it canceled altogether.
On the -- in the -- on the Gema powder equipment side, I'd say that program -- that organization is even 1 step more sophisticated in direct sale activity for systems is to accept an order requires a down payment, a very meaningful down payment approaching half the project cost. And so the buyers are very committed if an order receives gets developed to that point and shows up in our backlog. In my experience, I was involved with the team at Gema for a few years. I think in the 8 or 9 years, I was involved over all that time, one project was canceled.
Our next question comes from the line of Joe Ritchie of Goldman Sachs.
David, thank you for all the help throughout the years. Wish you the best in retirement and Sanjiv, welcome. So Yes. So maybe my first question. I just want to make sure that I fully understand the -- like the backlog conversion on the powder finishing systems. So was this simply that just the orders that you were expecting to come through in the first quarter came through later than you expected them to come through? Or was there anything else related to either supply chain or manufacturing that also impacted the conversion?
Yes, I don't think there was any crazy stuff. We did get a couple of nice orders right at the end of the -- right at the end of the quarter, but we were also converting on to the backlog that we had built in the month of February out at that same time. So they kind of offset one another. But no, we're not constrained in our operations. We're not constrained with the supply chain. -- is really just kind of the cadence of these orders coming in, and we will get them out the door. We just didn't get them off the door by the end of March.
Okay. All right, helpful. And I know you touched on the margin headwind, I think, in the first quarter being largely driven by lower volumes. I'm just curious, like with the acquisitions also coming through the industrial segment, how much of an impact did the acquisitions have to the margin degradation in 1Q?
On a total company basis, it's about 50 basis points related to the acquired revenue on a total company basis. So the stuff going through industrial was by far the majority.
Okay. All right. Cool. And then one last one. So last quarter, I think we talked a little bit about these like upfront licensing revenues that you were seeing from some of your OEM customers. I didn't hear it get called out today. Just any progress on that specifically would be helpful.
Yes. We've got a couple of other ones that we're working on, but we didn't really book anything here in Q1. So that's why we were silent on it. We still like the prospects for potential to get future license agreements with a lot of the technology. We've got it running through Graco products. Every time we meet with customer or an OEM. They're excited about the compact size of these motors, the fact that they take less material that they're high torque. So we're hopeful that we're able to do more in that area, but nothing in Q1.
Yes. I know we've talked about this before, Joe. It's sort of strategic -- it's a master class in strategic selling. Frequently, we are cultivating very large companies with large decision-making bodies and organizations and keeping their processes moving 1 large organization can be relatively responsive, quick and enthusiastic -- another organization can be equally enthusiastic, but the decision-making process moves at a different pace.
So I think the nature of this is while we're excited and Mark is right about the technology, the visible results that you're going to see over time are not going to have the same degree of predictability as our standard products business.
Our next question comes from Andrew Buscaglia of BNP Paribas.
Good morning, everyone. So yes, so it seems sort of starting out a little beat with 2 years ago, same scenario, all end markets are down. And that year, you kind of struggled to overcome things. So my question is, we're kind of 2 years later, kind of in the same setup. And the question does arise amongst investors. Like is there something -- this seems to be cyclical, but is there something more structural? And maybe does Graco needs to think about -- I don't know if it's a change of tack in terms of how you get volume, whether it's to touch your pricing or what. But I think at this point, you're 3 years in, and it just seems like the top line can't grow. So are there other discussions you guys have around anything around if there is anything under the hood structurally that's changed in the last 3 years?
I will just say that we have grown the top line. And I will say that, of course, every day, we come in here, and we're doing everything we can to grow the business. when you're reporting every 13 weeks, sometimes the quarters can look better than maybe the overall business might look and sometimes they don't look as good. We have been fighting some pretty substantial headwinds with respect to half of the revenue of the company that's tied to contractor and construction. And if you look at the macro data on anything, any metric that you look at over the last 4 to 5 years, that has been a really tough market to be in.
And I'm proud that our teams have actually been able to drive the results that we have driven given the environment that we're in, we get up every day. We're working hard. We're pushing our teams. We're launching products. Our teams are incentivized around growth. So there's absolutely no reason why they shouldn't be driving for better results. There's nothing structurally wrong with the company. It's still extremely profitable. It still generates a tremendous amount of cash. And we have been also very active on redeploying that cash, both through the form of share buybacks as well as M&A.
So No, there's nothing here that I think we need to do that's different. I think that we're doing everything that we can as we always have done.
Well, on that note, I think there's a little bit of there's some enthusiasm with this recent reorganization that there's something outside of what the market is giving you that you can find some incremental growth. And I guess where are we seeing that or to date, like -- where is that evident in your numbers? And will we see more a more pronounced impact going forward from that change you guys made a year ago? .
Well, again, we did guide to low single-digit growth, organic constant currency for the full year. For the quarter, our industrial business was up mid-single digit. -- growth, which was nice to see. Our expansion markets group is up high single digits growth. And those were offset by the fact that our contractor business was down 1%. So again, going back to the earlier comments, we're happy with what we're seeing. We'd like it to be better, obviously, we're pushing the team hard. We still feel confident that we're going to get to the guide that we talked about a couple of months ago.
[Operator Instructions] Our next question comes from Walter Liptak of Seaport Research.
I wanted to ask, just get a better understanding of kind of the monthly trends. You talked about January being weak. I wonder if you could attribute that to anything. And then February, we have the war kind of heating up, but it doesn't seem like from what you said about orders that, that has been impacting the trend for orders too much. But -- so I guess I'm asking like what are you hearing from customers, both in North America and other parts of the world. And as we got more of this behind us, are you getting more confidence that the customers can just kind of work through these macro uncertainties?
Well in our businesses, there's different kinds of decision makers. On the contractor side of the business, maybe the decision making you typically can be quicker. -- or a little more reactive because generally, the buyers represent -- they're smaller organizations or entrepreneurs and such. There, I would say not -- despite all the challenges of the world and our contractor business, which, again, Mark reminds -- is reminding us that it's 50% of our overall construction broadly defined. The largest market there is here in North America and specifically the U.S. And really, we haven't seen a change in the, I call it, the momentum of that business for a while and certainly not in the last couple of months despite all the global noise because the fundamental issues are -- remain the ones that you're familiar with about affordability and even mortgage rates. I would say that as focusing on the micro and not the macro, I was really excited when for a few days, the 30-year mortgage rate got below 6% in late February.
And now of course, it's, I want to say, about 630 or 635 currently. I think it gets more the world and decision-making when you look at industrial companies and how they make their decisions. And while I've got a list here I'll spare everybody in the interest of time, -- for example, we would say, "Oh, the auto industry market was slow for us. The auto OEM market was slow for us. We had some tough comps, and we didn't see too much activity in the first quarter.
But actually, we feel pretty good about our pipeline in the automotive industry, even in some markets like China where think of combustion conversion to and requiring additional investments in the body and the pink shop. We're seeing greater inquiries and expanded pipeline from before the end of the quarter, even through the current period. And it suggests to me that big picture, big manufacturers, they know the world is a noisy place. But if they're committed to moving in certain directions, they're going to make those investments. So it's a long-winded way of saying I don't see a lot of demand implications on the things -- on the new things that we have been absorbing here in the first 4 months of the year.
Okay. Great. And then I guess thinking about the second quarter and maybe the delays of the timing of shipments, especially for some of those powder orders, do we get like a normal seasonal bump up in the second quarter plus some of the orders that should have shipped in the first? Is that how we should think about it?
Yes. I think for the contractor business, our history has always been that Q2 is the top quarter. So I don't see any changes to that cadence. And I think on the orders that we just got in and recently, I mean, those are probably going to go off more in the back half with respect to the powder business. But for the legacy industrial business, we should be able to move those a little bit quicker.
Okay. Great. And then maybe a last 1 for me is on buybacks. You guys weren't too aggressive in the first quarter. How are you thinking about buybacks versus M&A deals can you do both?
This is Sanjiv Gupta. So I -- maybe I'll take a shot at it. So again, I think very consistent with how we've always done it. We be very disciplined with our capital allocation framework. And obviously, the goal here is to drive shareholder return while having our financial flexibility. So a strong balance sheet we'll continue to preserve that.
And then whatever operating cash flow we generate, which we have been generating very positively, we'll be using that cash to fund our growth. We've talked about internal growth that will be invested in projects which meet our return thresholds.
And second priority would be the growth, which is external growth through disciplined M&A. Mark talked about it. And that really needs to meet our share needs to create the shareholder value and meet the return and integration threshold for us. And you've seen that recently with our current acquisitions, COROB, Color Service and Radia.
And then in terms of shareholder return, obviously, we'll continue with the dividend. And any excess cash will be returned to the shareholders, and we'll be doing it very opportunistically as we've always done. So in summary, very consistent with our capital allocation framework, which we have deployed in the market that will continue.
Thank you. If there are no further questions, I will now turn the conference over to Mark Sheahan.
Okay. Thank you very much for participating today. I look forward to seeing you some time down the road here, and thanks again for your interest in Graco.
This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.
Graco Inc. — Q1 2026 Earnings Call
Graco Inc. — Q1 2026 Earnings Call
📊 Quarter at a Glance
- Revenue: $540M (+2% YoY; acquisitions +5%, currency +3%, organic -6%)
- EPS: GAAP diluted $0.70; adjusted non-GAAP $0.66, down ~6%
- Margins: Gross margin down ~60 bps; operating margin 26% (vs 27% prior year); tariffs added ~${7}M cost
- Backlog: Backlog up ~$26M; bookings +3% at actual rates
- Cash flow: Operating cash flow $120M; uses of cash: buybacks $16M, dividends $49M, capex $12M; tax rate ~20%
🎯 What Management Says
- Demand trends: Industrial and semiconductor strength supports growth; contractor activity softer
- Guidance posture: Reaffirms 2026 revenue growth: low single-digit organic, mid-single-digit including acquisitions
- Leadership & capital: Welcome Sanjiv Gupta as CFO; retirement of David Lowe; ongoing M&A and buybacks to deploy cash
- Milestone: Centennial year highlighted as foundation for future investment and customer focus
🔭 Outlook & Guidance
- 2026 outlook: Revenue growth: low single-digit organic, mid-single-digit with acquisitions; second-half easier contractor comparison
- Currency & costs: About 1% net sales and 2% net earnings tailwinds from currency in 2026; 232 tariff assessment ongoing
- Capex & expenses: Capex $90–$100M; ~$50M for facility expansions; unallocated corporate expenses $40–$43M
- Calendar note: 2027 will be a 53-week year with an extra week in Q4
❓ Analyst Q&A
- Backlog visibility: Most backlog conversion expected in 2H; no material cancellations seen; orders recently added
- Tariffs & pricing: Tariffs largely offset by pricing actions; refunds expected but not booked; 232 tariff impact uncertain
- M&A outlook: Pipeline remains active; long-term target ~10% revenue growth with about one-third from acquisitions
⚡ Bottom Line
Graco delivered a modest Q1 with acquisitions driving revenue, while volume softness and tariff costs limited margin progress. The company maintains 2026 guidance for low single-digit organic growth and mid-single-digit total growth, supported by disciplined capital allocation toward internal growth, M&A, and shareholder returns.
Graco Inc. — Q4 2025 Earnings Call
1. Management Discussion
Good morning, and welcome to the Fourth Quarter Conference Call for Graco Inc. If you wish to access the replay for this call, you may do so by visiting the company website at www.graco.com.
Graco has additional information available in a PowerPoint slide presentation, which is available as part of the webcast player. [Operator Instructions]
During this call, various remarks may be made by management about their expectations, plans and prospects for the future. These remarks constitute forward-looking statements for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. Actual results may differ materially from those indicated as a result of various risk factors, including those identified in Item 1A of the company's 2024 annual report on Form 10-K and in Item 1A of the company's most recent quarterly report on Form 10-Q. These reports are available on the company's website at www.graco.com, and the SEC's website at www.sec.gov.
Forward-looking statements reflect management's current views and speak only as of the time they are made. The company undertakes no obligation to update these statements in light of new information or future events.
I will now turn the conference over to Chris Knutson, Vice President, Controller and Chief Accounting Officer.
Good morning, everyone, and thank you for joining our call. I am here today with Mark Sheahan and David Lowe. I will provide a brief overview of our quarterly results before turning the call over to Mark for more commentary.
Yesterday, Graco reported fourth quarter sales of $593 million, an increase of 8% from the same quarter last year. Acquisitions contributed 4%, currency translation 2% and organic sales another 2% to growth in the quarter. Reported net earnings increased 22% to $133 million or $0.79 per diluted share. Excluding the impact of excess tax benefits from stock option rises, a nonrecurring tax benefit and the prior year business reorganization charges, adjusted non-GAAP net earnings were $0.77 per diluted share, an increase of 10%. The gross margin rate increased 80 basis points compared to the same quarter last year. The effects of our targeted interim pricing actions more than offset higher product costs resulting from lower factory volumes unfavorable effects of lower margin rates from acquired operations and incremental tariffs. Tariffs affected product costs by $4 million in the quarter, resulting in a 70 basis point decline in the gross margin rate. For the full year, tariffs of $14 million had an unfavorable impact of 60 basis points on the gross margin rate.
Operating expenses decreased $1 million or 1% in the quarter. The decline was driven primarily by business reorganization costs of $7 million and litigation costs of $9 million from the prior year that did not recur. Offsetting these costs were incremental expenses of acquired operations of $7 million and higher incentive-based costs. Contractor segment operating margin rate for the quarter was 24% and was consistent for the same period last year, excluding business reorganization charges and litigation spending.
Expansion markets segment operating margin was 28% compared to 20% for the same quarter last year. Expansion markets had upfront electric motor license fee revenue of $5 million in the quarter and $7 million for the full year. These upfront license fees increased the operating margin rate for the quarter by 9 percentage points and 3 percentage points for the full year. Total company adjusted operating earnings increased $21 million or 15% during the quarter. Adjusted operating earnings as a percentage of sales was 27% for the quarter compared to 25% for the same period last year. The full year adjusted effective tax rate was 20.5%, which is consistent with our expected full year and prior year tax rate on an as-adjusted basis.
Cash provided by operations totaled $684 million for the year, an increase of $62 million or 10%. Excluding acquisitions, inventory was $336 million, down $46 million for the full year and down $140 million from its peak of $476 million at the end of 2022. Inventory is currently at its lowest level since June 2021. Cash provided by operations as a percentage of adjusted net earnings was 153% for the quarter and 137% for the year-to-date.
Significant year-to-date uses of cash include share repurchases of 5.1 million shares, totaling $423 million, dividends of $183 million, acquisitions of $135 million and capital expenditures of $46 million. These cash uses were offset by share issuances of $37 million.
A few comments as we move forward to 2026. Based on current exchange rates, assuming similar volumes, mix of products and mix of business by currency, as in 2025, movement in foreign currencies would have a 1% favorable impact on net sales and net earnings for the full year 2026. The effective tax rate is expected to be 20% to 21%, excluding any impact from excess tax benefits related to stock option exercises and other onetime items. Projected unallocated corporate expenses and capital expenditures are projected to be $40 million to $43 million and $90 million to $100 million, excluding approximately $50 million up for facility expansion projects for the full year, respectively.
Finally, 2027 will be a 53-week year with an extra week occurring in the fourth quarter.
I will now turn the call over to Mark for further segment and regional commentary.
Thank you, Chris. Good morning, everyone. I'm pleased to report record sales in both the fourth quarter and for the full year. Sales were up 8% in the fourth quarter with acquisitions contributing 4% of the growth. Organic sales at constant currency were up 2% from growth in both the Industrial and Contractor segments. Despite continued sluggish conditions in core construction markets, improved performance in the home center channel, and double-digit growth in the COROB business allowed contractors to achieve organic growth in every region this quarter.
Our Industrial business had 11% growth in the quarter with strong organic performance in both the Americas and EMEA due to broad-based market improvement and the timing of completion and acceptance of systems-based projects. For the year, acquisitions contributed $113 million of revenue or 5% growth. We have successfully integrated COROB, while also completing the acquisitions of Radia and color service. Together, these businesses are expected to generate nearly $190 million in full year revenue. They have extended our market reach, provided new product lines and innovation and expanded our manufacturing footprint. Our acquisition pipeline is strong, and we are committed to generating 1/3 of our long-term revenue growth through executing smart and disciplined strategic acquisitions.
In 2025, operating cash flow of $684 million was up 10% from 2024 and was 137% of our adjusted net earnings for the year. This impressive cash flow has allowed us to invest $135 million in acquisitions, deploying nearly $50 million in capital expenditures, and return over $600 million to shareholders in dividends and share repurchases. We finished the year in a net cash position of $600 million.
In summary, our balance sheet is strong, providing us with the flexibility to achieve our long-term objectives.
Turning to segment performance. Contractor segment sales increased 8% in the fourth quarter with acquisitions contributing 5%, currency translation 2% and organic sales another 1% of the growth. The biggest driver of the organic growth was COROB, which grew 25% in the quarter. Sales volume improved with this being COROB's largest fourth quarter in the past 3 years. The COROB acquisition has performed as expected, and the Radia acquisition brings added capabilities to this attractive and growing space. The home center channel had growth in the quarter. However, foot traffic in the channel is still light. The pro paint channel grew sequentially despite slower sales compared to last year. The overall market for contractor equipment is flat with affordability concerns keeping activity subdued. Despite flat conditions, we've been investing in new products, which along with our pricing actions and the acquisitions previously mentioned are having a positive impact on our outlook this year.
Turning to the Industrial segment. We delivered a strong fourth quarter with sales up 11%, driven by a combination of solid organic performance and contributions from the Color Service acquisitions. Organic growth of 5% was primarily the result of project completions in Powder Finishing systems as well as good growth in the Americas and EMEA, offsetting declines in Asia Pacific, particularly China. For the full year, China grew in both revenue and bookings. Incremental margins for this segment were remarkably strong at 76% for the quarter and 117% for the full year, reflecting the benefits of One Greco.
Expansion markets declined 6% in the quarter, but grew for the full year with high single-digit full year sales growth in our semiconductor business. During the quarter, we had declines in our semiconductor, high-pressure valve and environmental businesses as compared to last year when we saw increased activity in all regions. Despite the quarterly decline, we had sequential revenue growth with this being our largest revenue quarter of the year. As Chris mentioned, our Electronic Motor business recognized upfront license fees resulting from the work our team has done to introduce this technology to OEMs and motor manufacturers. This proven technology is in Graco products today. And while we're optimistic about opportunities for signing more license agreements in the coming years, our revenue outlook does not include any estimates for upfront license fees in 2026.
Moving on to our outlook. As we reflect on the past year, we are pleased that revenue grew in each segment and region. Both the industrial and expansion market segments grew organically for the full year, and we are optimistic about the growth in contract during the fourth quarter. We're also pleased with the performance and contributions made by COROB, Color Service and Radia this year, and we're hopeful that we will continue to see actionable opportunities in 2026. Graco has engaged employees that are focused on our key initiatives of product innovation, pursuing strategic acquisitions and advancing the One Grego operating model. We're offering 2026 revenue guidance of low single-digit organic growth on a constant currency basis and mid-single-digit growth after factoring in expected incremental sales from the Color Service and Radia acquisitions.
In closing, as we enter our 100th year, I would like to thank our employees, suppliers, distributor partners and customers around the world for their contributions. While the last few years have been challenging for manufacturers like Graco, we navigated the obstacles and delivered meaningful value to our customers and shareholders. There are many things that contribute to our confidence in the future, but none more than our loyal and hard-working employees.
That concludes our prepared remarks. Operator, we're ready for questions.
[Operator Instructions] Our first question comes from Deane Dray of RBC Capital Markets.
2. Question Answer
I'll start off with a clarification. We haven't seen one of this get called out before the upfront licensing fee associated with the electric pumps. And there's been some inbound questions about, is this a onetimer? Or is it just the nature of this new product? And so just kind of give us some background here. You said it's going to OEs and to motor manufacturers. Is this going to be a lumpy type of revenue stream? And just some color there to start, please.
Yes, I can start. And a handful of years ago, we bought a company called ETM, and we bought the company because they make a high torque, quiet compact motor that we thought would fit pretty well within some of the Graco product lines. We actually want to find the company because we like the technology so much. We also recognize that there was potential that we could introduce that technology to other OEMs. And so we had a team that was really looking to work with those OEM manufacturers to sell motors to them. Long story short, that didn't play out real well. So a couple of years ago, we pivoted to a team now that's really focused on licensing the technology to OEMs and motor manufacturers that are noncompetitive with Graco that see the benefits of having a compact, high torque, quiet motor for their types of applications that they've got. So it's probably going to be lumpy. I'm really happy with the work that the team has done in getting some upfront agreements. There will be royalties on the back end that we'll talk about when they're meaningful enough. And of course, we'll highlight any other lumpy payments as they come in throughout the year. We want to make sure, though, Dean, that you didn't feel like you needed to model it in, in terms of our outlook for the full year on the organic constant currency. So we really have not factored in any of these upfront fees into that analysis. The motors are in Graco products today. You can find them in our contractor products. They're very well received in the marketplace. You also find them in our diaphram pumps that go into the process industries. And in our industrial markets where we're using electric motors to move paints around in factories. So it's a proven technology. We're excited about it. And it's nice to see that some of the benefits of what we did on the M&A front are paying off there.
Yes. I would just add to that, that because we already haven't successfully implemented in several of our products, into specific applications. Part of the process of an agreement with an OEM or another party is they will be used for what are defined as very specific applications.
That's all good to hear, and I appreciate that color. It's a little bit unique, but our bias would be just to include that in your operating results and not try to strip it out. But if you could highlight for us if there's any kind of lumpiness in the future quarters, that would be helpful. And then second question is more on the forward look. No surprise to us in the low single-digits organic guide. That's kind of where we were looking. What can you say in terms of the geographic conditions that you're looking at in '26. Interestingly, the traffic light slide only has the rearview mirror 2025, not the forward look. So what would be the broad brush changes any that you would highlight there? And anything about the last 5 weeks of inbound orders would be helpful, too.
Okay. Yes, Dean, when you said we hadn't made -- we hadn't updated it to -- I took personal offense. We did review process. And we did review the things. And the way I would characterize it is in the markets, especially the yellowish markets. The order rates have been steady and remained steady for the most part, where we stand. I would say that the data is, while not in any sense deteriorating, the upward momentum, the catalyst for covering a little bit more green, I think, is in our discussions and our analysis is a bit premature. So I feel pretty good about where we stand today. And yes, it does look like what we presented to you in the fourth quarter. And stay tuned, and I'm hopeful that we'll be able to color some of those dots green in the months to come.
Yes, I'd probably say that we had a low single-digit guide last year. We're coming out with a low single-digit guide. So at top level looking at, it doesn't really surprise me a whole lot that the dots didn't change colors meaningfully. I'd sort of characterize the geographic conditions as we kind of see them as low single digits, up into crazy on the upside, certainly, hopefully, we're not going to experience another leg down. We're not anticipating that. So I would characterize our overall outlook, Dean, is pretty cautious at this point, but we feel pretty confident that we can deliver low single-digit growth in 2026.
And the recent order trends?
Yes, the recent order trends would support that outlook.
Our next question is from Mike Halloran of Baird.
So maybe just a question on the fourth quarter and then reverting back to some 3Q commentary. Did you see any signs of pull-forward demand in the fourth quarter, particularly on the contractor side. And then also in the third quarter, you referenced some green shoots. Any thoughts on whether you're still seeing signs of green shoots or to David's more recent comments. Is it just pretty steady out there at this point? And maybe specifically refer to some of the green shoots you were seeing before and maybe an update on that side?
Yes. I don't think there was any pull forward. I think it was kind of normal fourth quarter from that to a point. I mean, there's always stuff that happens at the end of the year, but there's nothing out of the ordinary that comes to mind. The one thing that we did highlight is that there was a little bit of a pickup in the home center channel, whether that's sustainable or not, where that goes from here, none of us really knows, but that was encouraging to us because that has been a headwind for us for a number of quarters now. So hopefully, we're starting to see some signs of life there. I was just with our global sales team over the weekend for a meeting that they held. And we've been looking at data and talking with a lot of people. But I think there's a sense that at least here in North America, kind of a flattish outlook again on residential housing. So not like any kind of a dramatic shift there. As I said in my opening comments, being held back a little bit by affordability. Commercial is actually -- the team is pretty bullish about commercial opportunities really throughout the country, multifamily and some of the infrastructure things that are going on. So I felt like most of our salespeople were upbeat on what's going on on the commercial front in the course, those are more expensive, higher-margin products. So that's good. And then surprisingly, talking with some of the manufacturers -- paint manufacturers there, actually starting to see some hope on residential repayment, which would be great for us. As you know, the turnover in homes has been anemic the last couple of years. And to the extent that we get houses turning over again, there is a little bit more of a renewed bullishness on the residential repaint side. Of course, we've got new products coming out, too, that the team is excited about. So -- all in all, I would say that going into this year, feel a little bit better about contractor, maybe those are green shoots than we would have a year ago.
Yes. And I think that the only thing I would add is a number that we all track. Mortgage rates right now are somewhere around [ $610 million, ] which I think is the lowest that we've seen in this last cycle over several years, going back to Q4 of '23. Rates, I think, peaked out at 7.8% -- 7.9%. So it's still not that 5 handle that we'd like to see, but it's getting pretty dog-gone close. And with the pent-up demand that Mark touched on, I won't say it's a green shoot, but it's certainly something that could be an extremely positive development as the spring rolls along.
And then on the pricing side of things, what is the price assumption embedded in that low single digit? In other words, is there a volume growth assumption in that low single-digit organic growth number? And then also, could you just remind us when the pricing was implemented by segment? I know some of it was in that late 3Q time frame? Is there any that's coming in to start this year?
Yes. I think we're hoping to realize about 1.5% to -- 1% to 1.5% on the pricing front this year. Of course, it's sort of mix dependent and timing dependent. And then on the pricing rollouts, as you know, we did accelerate some of the 2026 price adjustments in the third and fourth quarter of 2025. So there wasn't -- and there haven't been a lot of price changes on Graco here in 2026. The timing of some of our larger customers and their price increases is more on a midyear basis. So we did see some benefit from those increases that we did in mid-2025, and we expect that being able to do that, those kinds of increases throughout 2026 as sort of our normal cadence.
Yes. So I would just -- yes, especially here in North America, by midyear, we hope to have price adjustments made for key channel partners and across all the legacy product families.
Our next question comes from the line of Saree Boroditsky with Jefferies.
Maybe just starting out at high level, could you just update us on your One Graco initiative, and how we should think about any benefit to sales or margin performance for this year?
Yes. So I think one of the things I would point to is the inventory reductions that we've been seeing in our factories as a result of One Graco are pretty significant once we put all the operations under one leadership team. And we looked at knocking down some of the silos that were amongst our operation units. We really identified some areas where we could make some changes, do some consolidations of different facilities and do a better job of managing inventory than we've ever done. I think, as a company. So I'm pretty happy about that. We also did obviously reduce expenses pretty significantly. Here, and you saw that show up in 2026. So I think the number that we gave last year of around $15 million, if I'm remembering correctly, Chris, is nodding. We did realize that maybe even a little bit more. So we did drive quite a bit of efficiencies in the company as a result of that. The first year, when you go through a regard, you're always going to have some growing pains, both on the internal side of the house and externally, I would say they've been minimal. I think that we've worked through any of the internal issues that we've had with sales and marketing teams in particular. And I think that as we go into 2026, these teams are fired up and ready to go. I mean sales people that now have access to multiple product lines gives them a lot more to talk to customers about. Same thing with channel partners where we had restrictions in the past. So it's hard for us to put a dollar value on the revenue impact in 2025 of the initiatives of One Graco, but we all feel very strongly as a management team that was the right thing to do, and it should give us some tailwind in 2026 and beyond.
And do you have a cost saving number then for 2026?
Well, because we rolled it out right at the end of last year and we hit the ground running in 2025, the full year benefit of One Graco, as I said, was around $15 million. There's no ongoing restructuring that we're doing costs that we're taking out related to One Graco. Of course, we're watching expenses and managing things as we always do here. But there's no ongoing cost out happening at the company.
Got it. Appreciate that. And then I think last quarter, you talked about orders coming in at low single digits. Just curious how orders performed into year-end and then so far in January.
Yes. I think what I would say is that we factor all that into the guide, right, that we're doing here for 2026. And what we've seen so far, it's early days. We're just getting through January here. We're not concerned at all on where the guide is in relation to the order rates that we're seeing from our business units.
Our next question comes from Bryan Blair with Oppenheimer.
I was wondering could little a little bit more on the upfront licensing agreements that Bayer team has won. You're very clear in that they're noncompetitive customers or at least applications and very specific there in. What are the markets or applications where you're winning that are outside of Graco exposures?
Yes. been that I've been reluctant to share any specifics on customers without getting their clarification or clearance that it's okay. I would just mention that we're licensing the technology to motor manufacturers as well as some OEMs. So with respect to the motor manufacturers, it's limited in terms of the scope of the motors that they're actually putting ETM technology into. But once they're in, they can go into multiple different applications anything from the process industries to ag industry to robotics in some cases, where they want a small compact motor that will fit better than what they currently have available today. So it's really up to them. t make sure that once it's introduced as they launch it to their customers. And with respect to specific OEMs, again, I'm not at liberty to speak to the names. But I will tell you that when we get in front of people, and we show them a Graco product that has the motor in it, that's functioning and working. It goes a long way toward building confidence with an OEM to say, okay, no, I would need to redesign the product that I have to put those motor technology into it saves energy. It's quieter. It's more compact, it's lighter weight, all features that seem to resonate well with those OEM customers.
Okay. That all makes sense. And then your team drove a pretty solid inorganic growth in '25. Messaging remains pretty favorable there. You obviously have abundant dry powder. I was just curious if you can offer any finer points on the overall size or scale of your funnel composition of the pipeline actionability? And what, if anything, has changed on those fronts over recent tests.
I think what's changed is our confidence in being able to identify strategic companies that make sense for Graco. We've been really encouraged with the handful of ones that we've done here recently. They've all been hand in glove deals for us. There's mutual benefits on both sides. There's excitement amongst our teams when they actually see how a business that's acquired can fit with their customer base or with their channel. And so I think there's some momentum within Graco, is probably building with respect to M&A. Of course, we're going to stay disciplined. I think that that's the most important element of any deal that you do. You want to make sure that you're creating shareholder value and that the companies are -- there's mutual benefit on both sides. So I'm encouraged by that. We have well over 100 names in our pipeline at any given point in time. Some are actionable at different levels. Some are out there quite a ways. I will say that as I look into early 2026, there are opportunities that will come along and to the extent that it makes sense for us to be active and purchase them, we'll be ready to go.
Our next question comes from Jeff Hammond of KeyBanc Capital Markets.
Just back on the home center, as you talk to those customers, did you get the sense of like did inventories get too low, or they're getting ahead of a price increase, or if it's underlying demand is actually getting better? Just a little more color on that.
Yes. I mean the foot traffic is still pretty light there. So I don't think they've seen a big uptick in foot traffic. It may have been some channel activity there where they just felt like they needed to get things in better shape with their inventory. We didn't launch any new products or anything significant that really impacted our business. So it's a nice dynamic. It's -- we haven't seen it for a while. I don't have a lot of -- unfortunately, I don't have a lot of color to provide that would give you anything more than maybe what you'd get if you spoke with them.
Yes. I just would underline Mark's last point, it was a bounce in a business. It was meaningful, but it follows three really depressing years. So I would be getting ahead of myself if I thought -- concluded that it suggest a major change. However, these people are good merchandisers. And when they order products they usually know what their needs are.
Okay, great. And then I think you had indicated after '24, a lot of our big capital projects are gone, but I think in CapEx, you have a tick up. Can you just talk about what's in the growth capital plans in 2016 to drive that?
Well, in addition to our maintenance CapEx, which I think over the years, we talk a number in 40% to 50% range. We're going to be starting in a couple of months, the construction of our new corporate headquarters building in the French light campus, where we already have two existing structures. And I think that the planned number for that, I think we've communicated. It is about $50 million, and most of that money will be spent in '26.
Yes. And we're also vacating our campus here in Northeast Minneapolis, which we will sell, which will offset that, but we haven't factored that into the numbers that we've given you. We will disclose that if and when happens, but it will be a noticeable reduction in the overall CapEx spend when we exit this facility.
Our next question comes from Matt Summerville of D.A. Davidson.
I was hoping you could kind of do a little bit of an end market around the horn in the industrial business, what you're seeing from your larger end market exposures and then maybe contrast that across the three regions? And then I have a follow-up.
Okay. Well, I will take this one on. I made a list of end markets and a couple of areas I call out some regions. So bear with me here. This might be a useful list or less useful. On the positive side, we have seen steady activity in the automotive space, both with EVs and with legacy companies, both in the quarter and for the full year. It was really one of the business areas where we continue to see investments here in North America and in other markets, including Asia. Our famous dealer service market, think lubrication equipment, remains strong for the full year and had another positive quarter. So that was -- this is several years in a row where we've seen the dealer business perform satisfactorily. Despite some of the lumpiness in our semiconductor space, and especially here in North America around the timing of projects, the business showed some firmness in the Asia region. And in our Process Equipment segment, some of our channel partners, especially some of the MRO companies have called out seeing pretty good performance in the food and beverage space. Mark already touched on the balance we've seen in home center, and I would add the foam insulation to that, but also it's the same thing off a very low level compared to where we were at a few years ago. Sort of on the flat or downside, the Tier 1 automotive has been a mixed picture for us, and that's typically a steady business. With some ups and down, mining has been soft, and that's one of the larger end user markets for our automatic and industrial lubrication equipment and Asia is, of course, a very big market for mining. Solar CapEx was down, although one of our sales executives just returned from Asia, and he says, well, the activity is down today or down in the prior quarter. Outside of China, the Asian manufacturers are seeing panel volume increases, and that probably bodes better things for us sometime in the future. And then I would add just a couple of other things. Certainly, here in North America, the construction-related industrial markets, furniture, cabinetry, white goods, window and door for the most part, are depressed. And I guess to maybe round it out and to give you a region, our protective coatings business was a little softer this year than it had been earlier in the year. We did see I don't know, some project order decline or less project activity in the Middle East where the oil and gas infrastructure is a big driver in spend for that equipment.
Great. And then just maybe an update, having completed now three deals in the last 15 months or so, kind of how you're thinking about the actionability of your M&A pipeline here looking over the course of 2026 and whether or not you're optimistic that we see a couple of additional deals it over the line.
Yes, I'd characterize it as pretty good, Matt. You never really know how things are going to shake out. But as we are going into the first quarter here, there's things that we're looking at like every other company is. As I said before, I think that the thing that's really changed for us is we're very confident that the companies that we're pursuing are ones that really make sense to us. And I think we've got some momentum within our organization to be able to utilize as we look at future deals, where we actually are able to get some confidence that we can add value to those companies and they can revalue to us. So I'd say it's a good picture at this point.
Our next question comes from Andrew Buscaglia with BNP Paribas.
A couple more maybe on the modeling front. So in industrial, it seems like you're not quite turn in the corner, but maybe the North America and Europe data suggests that maybe things are getting a little bit better. But how about on the margin front you had that mix headwind. I'm wondering how long if that continues into next year? Or how do you see margins playing out with those dynamics?
Yes. I think that the quarters are always a little bit difficult because you do get some lumpy projects in there. In this quarter, we did have that with our powder finishing business systems. A couple of big ones that shipped out and just sort of skewed the results. I mean, I think that the margins in industrial are fantastic. I've got no concerns whatsoever in terms of any kind of deterioration. If we can get volume rolling through the factories beyond this kind of low single digit, there's plenty of upside. You've seen the incremental margins this year. A lot of that was due to One Graco, but also decent margin performance on volumes that have been, as you said, kind of flattish here for a while. So yes, I feel good about where we're sitting on the profitability side in that business. It's really a volume story going forward.
Okay. Got it. Similar question on the modeling front with the expansion markets. You guys have done a great job getting those margins up in a short amount of time. I'm wondering, are there maybe the confidence is a little bit lower on the top line. I'm just wondering, are the higher-margin subsegments or subsectors that if they were to return to growth could be pretty influential on those margins going forward?
Yes. I mean, really all of the businesses within there are nice profitable businesses. So we don't really have any dogs in there. For sure, the semiconductor business has really high, nice margins as does our high-pressure business and our QED business. And then, of course, with the motor initiative that we've got going on there as well that just sort of adds on to the top of it. So I would say it's similar to the industrial from the standpoint that we've got the infrastructure in place. We've got the teams. And when the volumes are higher than what they are today, you'll love the incremental margins.
Our next question comes from the line of Brad Hewitt of Wolfe Research.
So I'm curious how backlog trended in the quarter. It looks like you got the backlog conversion in the game of business as expected this quarter, but any additional color there would be helpful.
Yes. I think we were -- we did a really good job in manufacturing in Q4. Again, I kind of give some of the credit to One Graco and that team being organized and making sure that we're focused on getting products out to customers that wanted them by the end of the year. As we enter 2026, I think backlogs are at a decent level. No concerns there. And we're going to be pushing product out as as quickly as we can. The powder business that you referenced is part of our backlog, obviously. And that can be lumpy because at times, you'll have projects, particularly in our SAT business, which is those vertical lines that are used to coat things like windows, aluminum extrusions, those types of things. These can be projects that can go 6 months or more. So when we look out, we have more visibility on the powder side than any other. And we're -- again, we factor all that into our organic outlook for the full year, which is, I think, very achievable.
Okay. Great. And then curious if you could help us as we think about the phasing of organic growth throughout the year in 2026. Would you expect the lowest growth in Q1? And then I know Q2 and Q3, you have easier comps. So could we be looking at maybe like mid-single-digit growth in Q2, Q3? Any thoughts there on the phasing?
I would just say, Brad, I think that our seasonality will probably hold this year. There's nothing that we look at that would change that. Typically, the way that we think about it is that if we have good business on the contractor side that we should have a stronger second and third quarter. And typically, we have project completion realization in the fourth quarter similar to what we've had this year.
For Industrial?
For industrial.
[Operator Instructions] Our next question comes from the line of Walter Liptak of Seaport Research.
I wanted to ask about, in 2025, you had that $100 million of incremental revenue. But in the profit walk, it was like $8 million in profits because of some extra costs. I wondered about like the delta there for 2026. Like how much revenue is going to be coming through with sort of a normalized profit in 2026, if that makes sense?
I would say, I think Mark referenced this in his script that from a revenue standpoint, if we get full year revenue from all of our acquisitions, that brings us to about $190 million of revenue related to what we would consider our acquisitions, which would be a COROB color service and Radia. And then from a standpoint on the margin side, when we factor in all of our purchase accounting and everything as such. I think that what you're going to see is pretty typical from these earnings rates that we saw this year, at least as a percentage of the earnings.
Yes, I think the COROB acquisition banked at this point in terms of the numbers. We all got a full year in. So it's not really going to have a meaningful impact on contract. And that was obviously the biggest one that we did. Radia margins are really good. They're not going to be materially different than what the overall contractor margin rate is. And then color service, which is part of the powder business rolls up under industrial, again, is sort of in line with our profitability there as well.
Okay. Great. And then so with the start of the year, maybe we could try a fun one. If we kind of like roll everything up, and you look at the year for positives and negatives. What I'm hearing from you is that the things that could go well could be maybe the lower mortgage rates, help the resi market or maybe some of these factory CapEx projects get lose? And then maybe on the negative side, you didn't say it, but are tariffs done for like downside impact. I guess I wonder if you could just run through your thoughts on what could go well, what could be a problem for this year.
Well, the world is a -- we're reminded where we're headquartered, that the world is complicated, unpredictable place. And certainly, when we look at the things that could go well, yes, I think you touched on a couple of them that are highly relevant here and including the fact that, once again, we're launching some new products in some of our most important markets. And hopefully, that will give us some lift. And manufacturers and contractor end users are -- when they're looking ahead, they make their decisions based on ROIs, and we continue to believe that's what our equipment generates. On the messy side, only the Good Lord knows about what the trade environment is going to be like in 2026. Certainly, tariffs were a headwind for us that we made a mid-course correction with price adjustments. And I guess we've demonstrated interim price adjustments. And we've demonstrated that we try to be nimble as well. If we see armed conflict in the Middle East or something, that could have repercussions that we don't understand today. But I think over our 100 years, the world has almost always been a turbulent unpredictable place.
Yes. I think we're pretty well covered on the tariff front. We did our pricing actions. And as we're heading into '26, we don't expect headwind. You're going to -- obviously, they're baked into the numbers anyway. So -- and as David said, I mean, none of us is ever going to know what's going to happen. I think we demonstrated that we're willing to flex, and we need to do to drive value for our investors and our shareholders, and we're prepared to do that. These are uncertain markets. And Graco's in a good spot to be able to maneuver our way through them in a smart way.
If there are no further questions, I will now turn the conference over to Mark Sheahan.
Okay. Well, great. Thanks, everybody, for participating. We're excited to wrap up '25 and get on to 2026. I think it's been a great year for Graco. It is our 100-year anniversary. Not many companies make it, 100 years. So we're super proud of that, and obviously, super proud of our employees for making sure that we're delivering good quality product every single day. So thank you so much. We're going to sign off. Have a great rest of the day.
This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.
Graco Inc. — Q4 2025 Earnings Call
Graco Inc. — Q3 2025 Earnings Call
1. Management Discussion
Good morning, and welcome to the third quarter conference call for Graco Inc. If you wish to access the replay for this call, you may do so by visiting the company website at www.graco.com. Graco has additional information available in the PowerPoint slide presentation, which is available as part of the webcast player. At the request of the company, we will open the conference up for questions and answers after the opening remarks from management.
During this call, various remarks may be made by management about their expectations, plans and prospects for the future. These remarks constitute forward-looking statements for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. Actual results may differ materially from those indicated as a result of various risk factors, including those identified in Item 1A of the company's 2024 annual report on Form 10-K and in Item 1A of the company's most recent quarterly report on Form 10-Q. These reports are available on the company's website at www.graco.com, and the SEC's website at www.sec.gov.
Forward-looking statements reflect management's current views and speak only as of the time they are made. The company undertakes no obligation to update these statements in light of new information or future events. I will now turn the conference over to Chris Knutson Vice President, Controller and Chief Accounting Officer.
Good morning, everyone, and thank you for joining our call. I'm here today with Mark Sheahan and David Lowe. I will provide a brief overview of our quarterly results before turning the call over to Mark for more commentary.
Yesterday, Graco reported third quarter sales of $543 million, an increase of 5% from the same quarter last year. Excluding acquisitions, which contributed 6% growth and currency translation, which contributed another 1% growth, organic sales declined 2% in the quarter. Reported net earnings increased 13% to $138 million or $0.82 per diluted share. During the quarter, we recognized a $14 million noncash gain from a reduction in the fair value of contingent consideration related to last year's acquisition of COROB. This gain is an unallocated corporate operating expense, excluding the impact of excess tax benefits from stock option exercises and this contingent consideration fair value gain, adjusted non-GAAP net earnings was $0.73 per diluted share, an increase of 3%.
The gross margin rate was flat compared to the same quarter last year. The effects of our targeted interim pricing actions started to be realized during the quarter, offsetting higher product costs resulting from lower factory volume, unfavorable effects of lower margin rates from acquired operations and incremental tariffs. Tariffs affected product costs by $5 million in the quarter, resulting in a 100 basis point decline in gross margin rate. Operating expenses decreased $6 million or 5% in the quarter. The decline was driven primarily by the recognition of the noncash gains related to the fair value contingent consideration reduction. Excluding this gain, total operating expenses increased $8 million or 6%, driven by incremental expenses from acquisitions of $10 million. Excluding expenses of acquired operations, operating expenses declined $2 million.
Adjusted operating earnings increased $5 million or 3% during the quarter. Operating earnings as a percent of sales was 28% for the quarter and consistent with the same period last year. The adjusted effective tax rate was 20%, which is consistent with our expected full year tax rate of 19.5% to 20.5% on an as-adjusted basis. Cash provided by operations totaled $487 million for the year, an increase of $51 million or 12%.
Improved inventory management from consolidating operations under One Graco and lower sales and earnings-based incentive payments drove the increase. Cash provided by operations as a percentage of adjusted net earnings was 146% for the quarter and 132% for the year-to-date. Significant year-to-date uses of cash include share repurchases of 4.4 million shares, totaling $361 million, dividends of $138 million and capital expenditures of $34 million. These cash uses were offset by share issuances of $32 million.
A few comments as we look forward to the rest of the year. Based on current exchange rates, assuming the same volumes, mix of products and mix of business by currency, as in 2024, movement in foreign currencies would have a 1% favorable impact on net sales and net earnings for the full year. Finally, projected unallocated corporate expenses and capital expenditures are $35 million to $38 million and $50 million to $60 million for the full year, respectively.
I will now turn the call over to Mark for further segment and regional commentary.
Thanks, Chris. Good morning, everyone. I'm pleased to report that sales were up 5% this quarter, with acquisitions contributing a strong 6% growth. This more than offset a modest 2% decline in organic revenue.
Our 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. While growth occurred in many product categories, overall sales were set back by the timing of Powder Finishing System sales compared to last year. Expansion markets performed well, led by momentum in the semiconductor space. Third quarter order activity increased mid-single digits across all segments, driven by strategic pricing and steady demand.
Last year's third quarter had a nearly $25 million backlog reduction. Excluding this reduction, organic sales grew 4%, aligning with third quarter order rates. Backlog levels are stable and no significant challenges are expected for the rest of the year. Details on backlog reduction by segment are included in the conference call slide deck.
We announced targeted price increases during the third quarter, and those efforts are gaining traction. These actions are helping to offset the impact of tariffs, which added $5 million in cost for third quarter and $9 million year-to-date. While pricing has not fully covered these costs yet, we expect this by the end of the year. Turning to segment performance.
The Contractor segment sales increased 8% for the quarter with acquisitions contributing 11%, more than offsetting a 3% decline in organic sales. Affordability concerns have continued to affect the North American construction market with declines in both the Pro Paint and the Home Center channels. Channel partners are managing inventory tightly in response to current conditions. On a positive note, Protective Coatings equipment sales had their best performance of the year, and [ Pavement ] products saw increased demand [ afforded ] by infrastructure investments. Incoming orders grew low single digits in the quarter, giving us confidence heading into the fourth quarter.
Industrial segment sales increased 1% in the quarter, with acquisitions and currency offsetting a 2% organic revenue decline. The Americas grew 3% organically, led by good demand in vehicle service and automotive OEM projects, particularly in Liquid Finishing Systems and Sealants and Adhesives. In EMEA, gains in Process Manufacturing were not enough to offset a drop in Vertical Powder Coating Systems due to project timing.
In Asia Pacific, there was solid demand in mining, which was not enough to offset lower solar and EV investments. Despite lower organic sales overall, profitability was extremely strong with incremental margins of 220% year-to-date. Expansion market sales were up 3% with good activity in semiconductor products, partially offset by declines in the Environmental business. While semiconductor has grown this year, we are still below peak revenue and continue to face some challenges in China. Margins have been strong throughout the year, though they may be volatile quarter-to-quarter due to fluctuating volumes.
Moving on to our outlook. Year-to-date sales are up 5%, supported by the 6% increase from acquisitions, which have more than offset a slight organic revenue decline of 1%. Heading into the fourth quarter, order rates are satisfactory and year-over-year comparisons in the Contractor segment are becoming easier. As a result, we're keeping our full year revenue guidance of low single-digit growth on an organic constant currency basis. That concludes our prepared remarks. Operator, we're ready for questions.
[Operator Instructions] Our first question comes from Deane Dray of RBC.
2. Question Answer
Maybe we can start with since macro overlay and expectations is so important. Kind of -- can you zip through the end markets and regions. Just the performance of what stands out versus expectations up or down? And then any kind of the forward look, the leading indicators day rates, what you saw the first -- the last 6 weeks of orders too, please?
Yes. So I think it's a continuation really, a lot of the themes that we've been talking about all year. I think that in terms of like the Industrial end markets, I wouldn't characterize the demand is robust, but I would also say that people are still ordering products, and there's targeted opportunities in some of the areas that we talked about, like vehicle service and our Process Pump segment, which have been pretty good. And also our Liquid Finishing segment is a lot of customers are looking at converting from air operated to electric. That's created some opportunities for us as well. So it's kind of hit-and-miss depending upon the customer type, the end market that we're in.
The North America market has probably been the one where we've unfortunately seen more caution from customers just because the changing landscape with respect to the tariff situation. I think it has created some caution in some of the end markets and some of the customers. We're hopeful that, that kind of cleans up. But if I were to put my hat on from the end of last year, when we were putting our plans together, I think we were more hopeful that we would have a more stable environment in North America than what we've experienced. Our teams are still working really hard. They're still executing. There's still opportunities out there. But again, the environment is not what I would characterize as robust.
China has really actually held up pretty well for us this year, which after a couple of years of declines there, it's been nice to see. And again, it really depends on the end markets that you're in, the mining industry, in particular, in Asia Pacific and maybe to a lesser extent China, has held up pretty well. And some of the traditional industrial markets, including Adhesives, Sealants and Liquid Finishing and the Powder business have actually held up pretty well in China. So I would say that China has been a positive surprise maybe for us after a couple of years of tough business over there.
And probably the other big surprise is just the uncertainty in some of the end markets with our Industrial business. Contractor, I mean, I know we'll get into it on this call. But the issue there, again, is just affordability. Home affordability issues primarily in North America. Nothing too surprising. We're hopeful that we get a little bit of a break on that with rates coming down. The environment has been tough. Last year, as you know, we had the lowest level of housing sales in this country since 1995, and this year is even lower than that. So turnover is good for us. Houses need to sell. When houses sell, they hire contractors to paint and they fix up and they remodel and it's just good for the overall health of our Contractor business. It will get better. We're very well positioned once things firm up on the demand side and we get some volume growth. The P&L is in great shape. Profitability is super high. Incremental margins look good. Cash flow is extremely strong. So it's really just making sure that we're all set up for what will be better volume days ahead in Contractor.
And the leading indicator look, day rates, October, et cetera.
When we look at the rates and what we see coming out from some of those indicators, pretty flat, I would say, on -- in terms of housing starts, with a 30-year interest rate is now at 6.1%, which is lower than it's been in quite some time. So we're hoping that as those rates start to trend downwards, that will see some improvements come with housing movement, as Mark had previously talked about.
Yes, still a pretty sluggish environment, Dean, and we're hopeful it's going to get better, but I don't think our results are really all that bad. When you look at how hard this housing and construction industry has been hit. I never -- I don't like the fact that we're down a little bit organically in Contractor. But given the pain that's gone on in that market for a while here, it's been -- a challenge to the team, has dealt with an admirable way.
Yes, I would just add that a fairly significant portion of that market, as Mark touched on, with resale acting so slow is remodeling activity. That's one of the areas that affects both our Pro Paint side and our -- our Home Center side of our business. That actually, this was the first year that the group that does forecasting around that Harvard University, projected that category to grow that activity to grow this year that really hasn't happened. So I think that, that holds us back and we hear some of our channel partners talk about the same things, both on the Home Center side and as well as on the Paint Materials side of the business.
And then just a follow-up. I know it's a rare event for you to do a second price increase in September. But just kind of give us some color about how it was reduced? Are they all sticking and you expect this to fully offset the tariffs? What's the time frame there?
Yes. Good question. We did announce price increases in the early third quarter. We'd like to give our channel partners enough time to digest those before we actually implement them. So we didn't actually start to really have those take effect until late in the third quarter. But I would say sort of low to mid-single-digit kinds of increases across all business units, in all of the regions with the exception of the Pro Paint channel in North America and the Home Center channel in North America, and those are queued up to go in January.
Our next question comes from Mike Halloran with Baird.
Can you unpack what you're implying for the fourth quarter here. If I -- is this mainly through the pricing that hasn't come in fully being more ramped in the fourth quarter comp. Is it something you're fundamentally seeing in the demand outlook, like you be a bit more confidence in the fourth quarter. Because the inflection of growth is above normal seasonality. And so I just want to make sure I understand what those puts and takes are, to get you to that positive fourth quarter number that's implied with the guide?
Yes. I think we're -- we kept the guide. I think that, obviously, you'll do the math, and you guys can figure out that it looks like we're going to be on the low end of the guide when we get there. We're not likely to get all the way up to the high end of the low single-digit guidance. But despite where we're at year-to-date, we're down about 1%. We think with our incremental pricing actions that we put in, the order rates have been stable, that somewhat better in the third quarter than what we had seen earlier in the year. Obviously, there's some areas of business that are doing better than others. And then we also have a fairly easy comparison in Q4 with the Contractor business. So you sort of put all that together and our team, our forecasts are rolling up to hitting in somewhere in that low single-digit range.
So to be clear, it's not like you're assuming there's something fundamentally getting better in the fourth quarter. It's more steady and then you put the other factors in play and then that's how you get to that guide?
Exactly. Yes. I think that's fair.
And if you think about kind of the second part of the second question, Dean add there. When does price cost be positive for you guys? So when does that drag-in? Is it with those price increases that you said were coming in the first quarter. When you hit the fourth quarter here, does that dynamic normalize out?
Yes. I think we'll definitely see it here in Q4. Actually, if you look at Q3 gross margin, if you were to back out the impact of the COROB acquisition, our margins were actually up in Q3. So we are doing okay on the price cost. We'll see that roll through here in Q4 as well.
Our next question comes from the line of Saree Boroditsky of Jefferies.
You alluded to this just a second ago on the price, but it looks like Contractor was the only segment to have a large headwind from product cost. I think you mentioned putting in price increases in North America in January. Just maybe talk to your ability to push through price in that segment versus the others?
Yes, it's good, but we are respectful of the fact that we deal with large channel partners and conversations happen around this time of the year. They start at that level, we intentionally did not try to push price midyear with them, I think is appreciated because some of our competitors did. So we fully expect that we'll be able to realize some pricing starting at the beginning of the year with our larger channel partners. We had to raise prices in Contractor in the Spray Foam category and the High-performance Coatings category and in our Line Striping and Texture businesses. So it's not like we didn't raise prices at all in Contractor. We did hit those categories with the other industrial categories in the September timeframe.
And you will see in our international locations, the product lines, especially we're talking about the Pro Paint line, which, of course, is largely sold through some of these big channel partners here in North America. Price adjustments will be processed there now, and we'll see some benefit even before the end of the quarter in that category, too.
Appreciate the color. It looks like you turned a little less negative APAC in expansion. Just maybe some -- an update on what you're seeing there and the key driver of that decision to update that pie chart?
Yes. I think that the Asia Pacific region, as I said earlier, I think overall, the China business has actually held up better than maybe what we thought. The comments that I made during the opening remarks were targeted at the semiconductor space, where despite decent levels of demand, there's still some challenges in getting licenses and getting products into China, which we are hopefully, we'll get cleaned up at some point. That's really, I think, part of the reason why we moved a little bit to a less optimistic view in that region overall. I wouldn't call it a dramatic change, but just kind of a fine-tuning of where we see things at here as we make our way through the year.
Our next question comes from Bryan Blair of Oppenheimer.
So you're a few quarters in now with the new organizational structure. And obviously, you've been navigating a pretty choppy-sluggish backdrop. To date, how is the more market and customer-centric framework helped your teams to navigate this volatility in better position for recovery? And then on the side of M&A strategy, has there been a noticeable difference in funnel development? Just curious what "proof points" you could call out.
Thanks for asking. On the One Graco side of the house, I think that it's still fairly early days. But for sure, we're seeing a lot of margin improvement from some of the cost initiatives that we took last year, just look at the industrial incremental margins, it's probably a good benchmark for you in terms of what we've done there. And we're on track with the targeted number that we had given you last year. Those things are moving forward quite well.
Commercially, the teams are really starting to gel with respect to having distributors be able to carry multiple product lines that they weren't in the past. So we're seeing like upticks in some of the MRO business because those are broad-ranging distributors that carry multiple products, and they're very interested in being able to get access to some things like our lubrication products, for example.
We're also getting, I would say, better penetration in some of the international markets like down in Mexico, where historically maybe we're a little bit more protective in terms of who would get access to products like our Quantum Pumps which are going into a lot of different applications on the process and sanitary side. Well, now we've opened that up a bit, and we're seeing some traction there as well. The teams are working well, but it is still early days. I mean, there's growing pains that happen whenever you put multiple business units together, and then you also put the regions together.
But I'm very happy with what I'm seeing and what I'm hearing from the teams. When I meet with customers, distributors, they're really happy. Because they view this as us taking down a lot of the walls that maybe prevented them from being able to sell different product categories that they walk by applications every day and they weren't able to have access to, let's say, for example, lubrication products. Well, now they have that. So it's really a matter of getting them trained, making sure that they've got the opportunities. And then if they do and they're trained, we're going to open up those channels for them. So I'm very happy.
On the M&A front, it's kind of a continuation. I like the pipeline. We've got a lot of companies in there. We're talking with them regularly. We're on top of any of the targets that we're interested in. We've had some success this year. Obviously, with the Color Service acquisition that we announced during the quarter. There's other things in the pipeline that we're also excited about. But it is a -- for sure, it is a secondary or secondary to our organic growth strategy. We want to execute on M&A. We like these businesses where they're technology based, where we think we can add some value or they're growing or we like the management team where we can add value, and we're continuing to push those types of opportunities pretty aggressively here at Graco. So hopefully, some stuff pops here over the next 6 to 12 months. But I think we're in a good spot.
I appreciate the color. It looks like top line contribution from your acquisitions has been pretty solid, at least in combination. Maybe offer a quick update on COROB and Color Service integration. I know the latter is still quite early stage. Just how they're performing relative to the deal model to-date?
Yes. I think that for sure, COROB is coming in right where we thought it would be, which was our expectation was that we wanted to make sure that we retained what we had seen from them previously in the earlier year in terms of the revenue. So we feel really good about where that one's at. No surprises, great business, great management team, super excited on how we can help them collaborate here better in North America, particularly with some of the larger channel partners like the Home Centers and the Pro Paint side where their penetration isn't as good as some of their competition. So very good there.
Color Service, a brand new, it is part of the Gema Powder business. It's being managed by a leadership team that is actually in charge of running our SAT vertical lines business. They're both in Italy. They are closely located to one another. Those teams are really early days, but they've got ideas as well on how to integrate and how to implement some of the best practices that the game organization has shown over the years into the Color Service business model. So we're excited about that one, too. It's a nice technology business. They're solving customers' problems. They're moving materials that people care about. It fits really well with what we're trying to do.
Yes. And I would just add on the Color Service side. They take us into some large markets that historically we haven't had a lot of exposure to like the textile market, powder market, and those could be good learnings in addition to, as Mark referred to, their powder technology expertise that our Powder Equipment business is quite excited about.
Our next question comes from the line of Andrew Buscaglia of BNP Paribas.
I just want to dig in on one comment you've been making in the last several quarters on Vehicle Service. First of all, how big is that? And then it just seems to be an interesting market that's bucking a lot of trends you're seeing across I guess, general automotive? And what are the dynamics there driving such good growth for you guys?
Yes. We don't break out the revenue on that, but it is a nice business for us. Actually, it was the business that Graco started with back in 1926. So we've been in it for quite a long time. I think that the teams would tell you that probably the biggest driver of the demand here more recently has been our focus on creating Fluid Management Systems that really track the information by vehicle in terms of the amount of fluids that are being dispensed.
So going back to these are materials that people care about. They're expensive, they matter, making sure that every single vehicle gets lubricated appropriately and that they're tracking the inventory of fluids that they need to be able to make sure that, that service is done correctly. And having that tie-in to the back office systems where they can do demand planning, order planning, schedule when the guy needs to come to take out the used oil, all those things. We bring a really nice package together for a lot of the larger fleets and auto dealerships and large users of this type of equipment, and that's really been a nice recurring theme for that group, but it started with the product and the technology.
And I would just add that motivating these dealers that Mark mentioned, is the fact that along with your used car activity, this is a service -- is a very profitable area for them, and anything they can do to expand the share of wallet of either the customers or the manufacturers during the early years of a new car service period is very interesting to them.
Okay. And your free cash flow, it's been delivering really strong conversion lately. You guys probably should do over 100% free cash flow conversion this year. I think that's the second year in a row now, and you're typically historically more like an 80% to 90% converter. Is this kind of the new normal going forward? And what is behind that? And how sustainable is that going forward?
Yes. I don't know that I would -- I don't know if I have a view on whether it's a new normal or not, but I would tell you that it is something that we're focused on. Cash matters. We know that. We are challenging our teams to make sure that we're not overutilizing the balance sheet when it comes to things like inventory and accounts receivable. I will say that One Graco initiative helped clean some of that stuff up. Where in the past, you've had multiple factories, every division has their own factory. Every division had their own warehouse and operations around that. So being able to put that all under one organization has really driven a lot of improvements.
It's early days for us in terms of what we think we have available to us and improvements, but it is getting a lot of attention and focus on our end because we all know that it is a very important metric, and it is a value creator, for the company. And that's not something that we take lightly and it's not something that we have lost sight of. And I feel like we're in a really good spot to continue to drive improvements going forward. David, I don't know if you have anything else to add?
No. I think that even on the -- I think an important point is the One Graco point is that the -- we didn't take the steps as a strategy to drive operations. But as we talk to our operating team sort of quarter-by-quarter, they're finding opportunities where they can eliminate duplication activities, have these center of excellence that we've talked about before, and not only can it improve quality, it includes service levels, there's really money to be saved on the factory floor by eliminating those.
Yes. The only other thing I might add, too, just as I was thinking about it is over the last 5 years, we've added a lot of production capability here at Graco. We've expanded multiple facilities. We broke ground on a bunch of new ones. We're in really good shape, brick-and-mortar wise. We did announce earlier in the year that we're going to be consolidating operations out of our Minneapolis factory into currently existing Graco facilities, [indiscernible] in Minnesota as well as in South Dakota and down in Ohio. So being able to do that, those types of things, again, kind of lines up with One Graco. It might have been harder to do that, under the old regime, but now being able to really close a factory here and move all the production into these new state-of-the-art facilities is pretty exciting. Plus all the overhead cost infrastructure, things of keeping a factory up and running will go away.
Our next question comes from Joe Ritchie of Goldman Sachs.
I was curious around the additional disclosure you guys gave this quarter on backlog. Because I historically just never thought of you guys as a backlog company. And so I just wanted to get into better understanding as to what you were trying to, I don't know, signal, not signal by providing that information?
Yes, we thought it would be helpful, and that's why we put it in there. You're right. We don't normally talk about it. But when you just look at the third quarter in and of itself, last year, we did have a significant amount of backlog that flowed through the top line to the tune of about $25 million, $30 million, something like that. Some of that was in our Industrial business, on the Gema Powder side, on some of the Sealants Adhesive Systems that were being sold during that time period. And then part of it too, is on the Contractor side as well, where they had some new products that were a little bit late on the launch cycle last year. So they had built up some orders and got those shipped out in Q3.
What I'll say is that right now, our backlog is about where it was at the beginning of the year, and we feel like that is a really good place to be in. We don't have any more headwinds. Our backlog is in the neighborhood of $225 million, $230 million. I'm looking at Chris, he's nodding his head. At one time, our backlog was $500 million at Graco, and that was obviously when the supply chain crisis happened and all those orders come flying in and inflations hit and then everyone's put their orders in ahead of time. So we've really unwelded that now over the last years, and we're at a point now where it's really back to a more or less a book-and-ship business with the exception of maybe the game of powder business, which is more project-based.
That's super helpful. And do appreciate that context. And I know, look, I know that you guys don't give guidance outside of our expectations for growth for the entire year. But as you kind of think about maybe kind of like an early framework for 2026. What's interesting to me is that you look across your different businesses and look outside of expansion, of late, you really hadn't seen a lot of growth across Contract or Industrial, but your margin expansion in Industrial, particularly has been notable. I'm just trying to get a sense for how to think about maybe segment margins going forward into 2026? And so any kind of qualitative or quantitative comment would be helpful.
Well, I think the key -- the key to margins in our business model is going to be the volumes. I think that we believe one of our sort of bedrock way, as we think about our business is in all of our businesses, we have opportunities to improve margins. And I've demonstrated I'm not much of a forecaster in terms of when the business is going to turn. But I do believe with some volume growth, moderate volume growth in Industrial and in Contractor, when that happens, it can carry these margins that aren't bad today, I think, is your point to an even higher level.
Yes, I would just say it too, that we're really good operators at Graco. I think we do a great job in terms of getting our teams oriented around making sure that we're not spending resources that we don't need to spend. And as we add into next year, I think that, that's going to be the go in mantra that we're really going to keep a close eye on our expenses, manage that well. We get some tailwind hopefully on some of the pricing actions that we've done. And if we get a little bit of help on the -- half of our business is tied in with commercial construction, housing, those end markets, contractor type markets, if we get any help on that. As David said, the volume will really, really help the equation.
Our next question comes from Jeff Hammond of KeyBanc Capital Markets.
This is Mitch Moore on for Jeff. Maybe first, I know there's a lot of moving pieces with the macro right now, but how should we be thinking about the magnitude of the price increases for early 2026 in Contractor? And then more broadly for the segments, does the fact that this recent price -- you did this recent pricing action change your view on doing another price increase here in a couple of months?
Yes. So we're not going to comment on the level of the pricing with the home centers and the pro channel is because those negotiations are happening and our teams are working. I don't want to say anything that is -- we'll put them in a bad spot. So I would expect that we're going to get what we are proposing, which will be reasonable. It will be fact-based. It will be based on what we're seeing for input costs. We're very transparent. We share all that information with them, and also based on what we view pricing in the market to look like. So we're expecting that those will kick in the January time frame.
As of the rest of it, I think in terms of what else we might do in other business units, I'm going to leave that up to them. Obviously, to the extent that we think that we have the ability to raise prices again in 2026, we'll do that. But I think we are also cognizant of the fact that over the last 3 to 5 years, there's been a lot of pricing that's going on in our end markets. So it's really competitive based and there will likely be some targeted price increases, but we've we're aware of the fact that the market where because of all the activity on the pricing front, including the stuff that we just did my preference would be to not push quite as hard as what we have.
That's helpful. And then just maybe sticking with pricing and competition and tariffs. I was just wondering, particularly with the DIY and Pro Paint channels. Just wondering if there's been any evidence of share shift towards Graco versus some of your foreign competition?
I don't think that, that's something that we can quantify because it's really difficult. But I will tell you that in the Home Center channel in North America, which is like really the primary channel for those types of products, their business is down pretty significantly. So are we down more than our competition? Are we down the left? It's really hard to know. I just know that it's down, and their foot traffic is down, their level of business activity is down. It ties back in with this whole turnover, affordability, remodeling those markets have just been pretty flat to down, and I think we're seeing that in that channel. So it's hard to know whether we're doing -- we're not as bad as our competitors, but I don't like the fact that we're down.
Yes. Promise is, of course, everybody has a different -- somewhat different manufacturing footprint. And sometimes they go for price and sometimes they have to lump it, and I think that -- that applies really across most of our niche businesses is that we could be talking about Liquid Finishing too, and each of the major manufacturers have very different global footprint. So there's frequently a story behind the story.
But Mark's underlying point is absolutely right-on. In the short term, they are switching costs, which tend to make our relationship sticky. But big picture longterm, products have to be priced as to what the market will bear.
Our next question comes from the line of Matt Summerville of D.A. Davidson.
Just a couple of quick ones. Do you have an early read on what the Contractor kind of new product pipeline looks for 2026 is you think about maybe trying to use innovation to reinvigorate demand if we're going to be in this, I'll just call it, general housing delays, for longer? Things maybe to help stimulate a replacement cycle? Or is that something maybe you've already done in the recent past?
I would say the pipeline looks pretty similar to what we have experienced over the last few years. I'd call it more of a normal year. Some additions in the Paint category, some in the Line Striping category and some of the [indiscernible] category. But it's a good pipeline. It should help drive some demand. Yes. So I'd call it kind of a normal year next year in terms of what we're seeing.
And then you'd mentioned in Contractor, I think it was in your prepared remarks that you're seeing both Home Center and Pro Paint customers tightly manage inventory. Do you expect inventories to further decline into calendar year end? Or are they running about as lean as you would expect them to run given the environment we're in?
Yes. I think they're pretty sorted. And I think that they're -- I sense that they've got a lot of inventory that they got to get rid of or deal with here. I think that they're managing it to the levels of the business that they're seeing.
Our next question comes from Walter Liptak of Seaport Research.
I wanted to ask kind of similar to what Matt was just asking on 2026. I know you don't get a whole lot of visibility, but I wonder if you could comment a little bit about maybe in Industrial, some of those capital projects, is there a lot of quotes out there? Could they get released? And then when you think about 2026 in the One Graco and kind of the new go-to-market strategies. All things being equal, could you get another 1% or so of organic growth just from your own kind of strategic changes?
Yes. I think that -- I'll take the second one. That's what we're driving for is -- you don't go through all the work to do this without really expecting that your channel partners are going to get access to more products and sell more and have it easier to do business with. I think it translates into growth for us vis-a-vis what we would have had under the under the old regime. I haven't put a number to it. I don't know if it's a percentage thing, but that is definitely the reason why we did it.
I'll take a shot on the investment side, your first question. When we look around -- when we sell to so many different markets, it's always hard to generalize. And so we can always find three or four positive stories, a couple of disappointments. What I would say in terms of quotation activity and discussions around projects, which is while we're short cycle, we sometimes have an indication that major customer is working on, say, a new paint line or a new sealant line or something like that. We have good quotation activity in traditional Graco markets like farm and construction equipment even throughout the, call it, the turbulent times of the last couple of years, automotive as a business, both in the legacy and the EV has been consistent in making investments.
And when I talk about other -- some of the other niche markets that we serve, they get pretty small, so we can have a couple of orders, say from the commercial-aerospace market. There aren't that many manufacturers around the world, but we have heard of investment possibilities that are at least intriguing going into the coming year. But of course, there's markets that have been soft, as we've talked about late both on the construction and on the industrial side, especially those markets that serve the construction industry like window and door, furniture, some of the white goods, people that can swap over into a couple of -- two or three of our different business units.
On the construction side, I would say our premise that you've heard us talk about Walt, over the last 5 years hasn't changed. We're still under-built. We have a generation of people that if we can see some improvement in affordability, and that does start with mortgage rates. That's why we track them probably as closely as you people do. We really believe that when we have a little bit better dynamics there, there's a lot of housing to be constructed. And as we've already touched on, a lot of remodeling re-paint work that will help us.
Great. I appreciate the kind of thoughts on that macro. Maybe another one that's on 2026. When you think about the One Graco -- is there a profit component over the margin components that you talked about as well as the organic growth component. Which one is easier, which one could you see the most benefits from in 2026? Is it more top line or is it more on the profit improvement?
Yes. I think for sure, if we can get volume on the top line, it's going to really be nice for us. So I'd say that one.
[Operator Instructions] Our next question comes from Brad Hewitt of Wolfe Research.
So as we think about Contractor margins, it looks like you've done about 28% margin year-to-date, excluding COROB. I guess how do you think about incremental margins for contractor going forward? And how much volume recovery do you think is necessary to get back to kind of the 29% to 30% zone ex-COROB?
Yes. I don't think a lot of volume is needed. Obviously, the pricing is going to help us offset some of the tariff costs. Volume starts coming back, then you can -- you realize a lot of efficiencies in the factory that we're just not seeing when volumes are flat or even slightly down. So I have no concerns whatsoever in terms of them getting back up to those kinds of margin rates even with a very small amount of volume increase.
Great. And then Curious if you could provide a little more color on what you're seeing in the White [indiscernible] business from a growth perspective this year? And then from a medium-term perspective, is there potentially any change to your thoughts on the growth algorithm for that business? As a result of the proposed [indiscernible] on semiconductors?
Yes. I don't know that we are going to be able to give you like specifics on revenue for the White [indiscernible] business, but it has come back. Obviously, everyone knows that there was about a 2-year period there where a lot of those investments were not happening, but it's a cyclical business, and we recognize that. And things have picked up there, and they are getting orders, and we're happy about that. But I think as I said in the earlier comments, they're not back to the levels that they were at a couple of years ago. The macro still looks pretty favorable. There's still a lot of investment going on. I'm sure that we'll be able to get our fair share of that.
If there are no further questions, I will now turn the conference over to Mark Sheahan.
Okay. Well, I want to thank everyone for participating today, and I look forward to chatting with you down the road.
This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.
Graco Inc. — Q3 2025 Earnings Call
Financial data from Graco Inc.
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 2,267 2,267 |
5%
5%
100%
|
|
| - Direct Costs | 1,066 1,066 |
3%
3%
47%
|
|
| Gross Profit | 1,202 1,202 |
6%
6%
53%
|
|
| - Selling and Administrative Expenses | 489 489 |
4%
4%
22%
|
|
| - Research and Development Expense | 82 82 |
2%
2%
4%
|
|
| EBITDA | 751 751 |
10%
10%
33%
|
|
| - Depreciation and Amortization | 107 107 |
8%
8%
5%
|
|
| EBIT (Operating Income) EBIT | 644 644 |
11%
11%
28%
|
|
| Net Profit | 534 534 |
11%
11%
24%
|
|
In millions USD.
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Graco Inc. Stock News
Company Profile
Graco, Inc. is a manufacturing company, which designs, manufactures and markets systems and equipment used to move, measure, control, dispense and spray fluid and powder materials. It operates through the following segments: Industrial, Contractor and Process. The Industrial segment includes the Applied Fluid Technologies, Industrial Products and Process divisions. It markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil & natural gas, water, wastewater, petroleum, food, lubricants and other fluids. The Contractor segment equipment includes sprayers that apply texture to walls and ceilings, highly viscous coatings to roofs and markings on roads, parking lots, athletic fields and floors. Graco was founded by Russell Gray and Leil Gray in April 1926 and is headquartered in Minneapolis, MN.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Sheahan |
| Employees | 4,400 |
| Founded | 1926 |
| Website | www.graco.com |


