Graco's Earnings Miss Estimates in Q3, Sales Decline 4% Y/Y

Core Insights - Graco Inc. reported third-quarter 2024 adjusted earnings of 71 cents per share, missing the Zacks Consensus Estimate of 76 cents, representing an 8% decline year over year [1] - The company's net sales were $519.2 million, falling short of the consensus estimate of $535 million, and decreased by 4% year over year due to lower demand across all segments [1] - Regional sales showed mixed results, with a 1% increase in the Americas, a 2% decrease in Europe, the Middle East, and Africa, and a significant 21% decline in the Asia Pacific [1] Segmental Performance - The Industrial segment generated net sales of $156.3 million, accounting for 30.1% of total sales, down 1% year over year, with foreign exchange issues impacting sales [2] - The Process segment reported net sales of $120.6 million, contributing 23.2% to total sales, down 12% year over year, with core sales also declining by 12% [2] - The Contractor segment achieved net sales of $242.3 million, making up 46.7% of total sales, down 1% year over year, although core sales increased by 1% [2] Margin Analysis - Graco's cost of sales decreased by 4.7% year over year to $243.1 million, while gross profit fell by 3% to $276.1 million, with a slight margin increase of 0.5 percentage points due to favorable pricing [3] - Operating income decreased by 10.7% year over year to $145.7 million, and the operating margin fell by 2.1 percentage points compared to the previous year [3] - Interest expenses were reduced to $0.7 million from $1.4 million in the prior year, and the adjusted effective tax rate was 19.2%, slightly down from 19.6% year over year [3] Financial Position - As of the end of the third quarter, Graco had cash and cash equivalents of $764.5 million, an increase from $538 million at the end of 2023 [4] - The company generated net cash of $436.5 million from operating activities in the first nine months of 2024, compared to $491.4 million in the same period last year [4] - Capital expenditures for property, plant, and equipment totaled $92.8 million, down from $145.6 million in the previous year, while dividends paid to shareholders increased by 8.7% to $129 million [4] Future Outlook - Graco anticipates organic net sales to decline in the low single-digits on a constant-currency basis for 2024 [5]