Graco (NYSE:GGG) Shares Gap Down on Disappointing Earnings

Key Points

• Graco shares fell sharply, opening at $73.11 after closing at $81.81, following quarterly results that missed expectations.
• Third-quarter EPS was $0.81 versus the $0.83 consensus, while revenue of $586.4 million missed estimates of about $590.2 million. Sales still grew 7.9% year over year, but operating profit and net income declined.
• Graco declared a quarterly dividend of $0.295, equivalent to $1.18 annually and a 1.7% yield. Analysts maintain a consensus “Hold” rating with an average price target of $94.75.

Graco Inc. (NYSE:GGG - Get Free Report) shares gapped down before the market opened on Thursday following a weaker than expected earnings announcement. The stock had previously closed at $81.81, but opened at $73.11. Graco shares last traded at $71.0050, with a volume of 452,727 shares changing hands.

The industrial products company reported $0.81 earnings per share (EPS) for the quarter, missing the consensus estimate of $0.83 by ($0.02). Graco had a return on equity of 19.54% and a net margin of 23.53%. The business had revenue of $586.39 million for the quarter, compared to analyst estimates of $590.17 million. During the same period last year, the firm earned $0.73 EPS. The company's revenue for the quarter was up 7.9% compared to the same quarter last year.

Graco Announces Dividend

The firm also recently declared a quarterly dividend, which will be paid on Wednesday, November 4th. Stockholders of record on Monday, October 19th will be paid a $0.2950 dividend. This represents a $1.18 annualized dividend and a dividend yield of 1.7%. The ex-dividend date of this dividend is Monday, October 19th. Graco's dividend payout ratio (DPR) is currently 37.11%.

Key Graco News

Here are the key news stories impacting Graco this week:

• Positive Sentiment: Graco reported record third-quarter sales of $586.4 million, up 7.9% from the prior year. Earnings were also higher than last year at $0.81 per share versus $0.73, while operating cash flow remained positive at $165.5 million. Graco Reports Record Third Quarter Sales
• Positive Sentiment: Graco’s Electric Torque Machines subsidiary signed a technology licensing agreement with ABB for data-center cooling towers and heat-rejection systems. The partnership could provide exposure to expanding data-center infrastructure demand, although the financial contribution was not disclosed. Graco Announces Technology Partnership with ABB
• Neutral Sentiment: Institutional positioning was mixed in the latest reported quarter, with 337 investors adding Graco shares and 357 reducing their holdings. Insider activity was also balanced, with one reported purchase and one sale.
• Negative Sentiment: Third-quarter adjusted EPS of $0.81 missed the consensus estimate of $0.83, while revenue of $586.4 million was below the approximately $590.2 million forecast. The misses triggered a negative market reaction. Graco falls as third-quarter results miss estimates
• Negative Sentiment: Profitability weakened despite sales growth: operating profit fell 10.1% to $148.1 million, net income attributable to common shareholders declined 11.7% to $121.6 million, and diluted EPS decreased on a year-over-year basis in the detailed results. The combination of weaker earnings and margin pressure outweighed the record revenue. Graco shares fall after earnings and revenue miss

Wall Street Analyst Weigh In

GGG has been the topic of a number of recent research reports. Royal Bank Of Canada lowered their price target on shares of Graco from $96.00 to $95.00 and set an "outperform" rating on the stock in a research report on Wednesday, October 14th. Weiss Ratings upgraded shares of Graco from a "hold (c-)" rating to a "hold (c)" rating in a report on Tuesday, August 4th. Wolfe Research lowered shares of Graco from an "outperform" rating to a "peer perform" rating in a research note on Thursday, July 9th. DA Davidson reissued a "neutral" rating and issued a $85.00 target price on shares of Graco in a research note on Monday, July 27th. Finally, Robert W. Baird set a $94.00 target price on Graco in a report on Friday, July 24th. Two analysts have rated the stock with a Buy rating and five have issued a Hold rating to the company. Based on data from MarketBeat, the stock currently has a consensus rating of "Hold" and an average price target of $94.75.

Institutional Inflows and Outflows

Several institutional investors and hedge funds have recently modified their holdings of the company. Cassaday & Co Wealth Management LLC acquired a new stake in Graco during the first quarter worth about $26,000. Whipplewood Advisors LLC raised its stake in Graco by 2,650.0% during the first quarter. Whipplewood Advisors LLC now owns 330 shares of the industrial products company's stock worth $28,000 after purchasing an additional 318 shares during the period. Essential Partners LLC boosted its holdings in Graco by 78.6% in the 1st quarter. Essential Partners LLC now owns 359 shares of the industrial products company's stock valued at $30,000 after purchasing an additional 158 shares during the last quarter. Root Financial Partners LLC boosted its holdings in Graco by 43.2% in the 1st quarter. Root Financial Partners LLC now owns 504 shares of the industrial products company's stock valued at $43,000 after purchasing an additional 152 shares during the last quarter. Finally, Elevation Wealth Partners LLC grew its stake in shares of Graco by 2,540.0% in the 2nd quarter. Elevation Wealth Partners LLC now owns 528 shares of the industrial products company's stock valued at $40,000 after buying an additional 508 shares during the period. Institutional investors and hedge funds own 93.88% of the company's stock.

Graco Stock Performance

The firm's 50 day moving average price is $78.78 and its two-hundred day moving average price is $78.52. The firm has a market cap of $11.56 billion, a PE ratio of 22.44, a PEG ratio of 2.52 and a beta of 0.89.

About Graco

Graco Inc is a global manufacturer of equipment used to move, measure, control, dispense and apply fluids and other materials. Its products are used in industrial, commercial and residential applications involving paints, coatings, sealants, adhesives, lubricants, chemicals and other fluids.

The company's product portfolio includes pumps, valves, meters, regulators, fluid-management systems, lubrication equipment, spray-applied coating and finishing systems, sealant and adhesive equipment, and contractor-oriented painting and texture application tools.

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