Yahoo Finance Why Is Graco Inc. (GGG) Down 1.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Graco Inc. (GGG). Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Graco Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Graco Q1 Earnings & Revenues Beat, Increase Y/Y
Graco’s first-quarter 2023 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate of 61 cents per share. The bottom line improved 29.8% year over year.
GGG’s net sales of $529.6 million also outperformed the Zacks Consensus Estimate of $499 million. The top line increased 7.1% year over year driven by double-digit growth in the Process segment.
On a regional basis, quarterly sales generated from the Americas grew 8%. In Europe, the Middle East and Africa (EMEA) region, sales increased 2% year over year (or up 7% at the constant-currency rate). Sales from the Asia Pacific increased 6% year over year (or up 1% at the constant-currency rate).
Segmental Details
Revenues in the Industrial segment totaled $150.2 million (contributing to 28.4% of the quarter’s sales), rising 4% year over year, driven by solid growth in the Americas and EMEA regions. Adverse foreign currency translations lowered sales by 3%. Core sales grew 7% year over year.
Revenues in the Process segment grossed $133.5 million (contributing to 25.2% of the quarter’s sales), increasing 16% year over year. The improvement came on the back of a 16% rise in core sales, driven by growth in all product applications.
Revenues in the Contractor segment totaled $245.9 million (contributing to 46.4% of the quarter’s sales), up 5% year over year due to favorable response to new product offerings and improved product availability. Core sales increased 7% in the quarter.
Margin Profile
In the first quarter, Graco’s cost of sales grew 2% year over year to $244.5 million. Gross profit decreased 1% to $285.1 million, while the margin increased by 12 percentage points. The favorable effects of realized pricing and product and channel mix favored the margin’s performance.
Operating income increased 22% year over year to $156.7 million. The operating margin increased 3.6 percentage points from the year-ago quarter. Interest expenses in the quarter totaled $1.3 million, compared with $5.3 million reported in the year-ago period. The adjusted effective tax rate in the quarter was 18%.
Balance Sheet and Cash Flow
Exiting the first quarter, Graco had cash and cash equivalents of $395.3 million, compared with $339.2 million at the end of 2022. The long-term debt was $75 million, flat compared with the December 2022 level.
Graco generated net cash of $90.8 million from operating activities in the first three months of 2023, compared with $31.1 million generated in the year-ago period. Capital used for purchasing property, plant and equipment totaled $38.3 million, compared with $47.1 million in the year-ago period.
GGG paid out dividends worth $39.4 million to its shareholders in the first three months of 2023, up 10.1% from the previous year. Graco repurchased common stocks worth $7.8 million in the first three months of 2023.
Outlook
Amid microeconomic uncertainties, Graco expects to benefit from robust end-market activity and strong demand trends for new and existing products. The company expects low single-digit organic revenue growth on a constant-currency basis for 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 10.01% due to these changes.
VGM Scores
At this time, Graco Inc. has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Graco Inc. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Graco Inc. (GGG) : Free Stock Analysis Report
