Graco (GGG) Up 8.8% Since Last Earnings Report: Can It Continue?

Core Insights - Graco's third-quarter 2024 adjusted earnings of 71 cents per share missed the Zacks Consensus Estimate of 76 cents, representing an 8% decline year over year [2] - Net sales for the quarter 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 [2] Sales Performance - Sales in the Americas increased by 1% year over year, while sales in Europe, the Middle East, and Africa decreased by 2%, and sales from the Asia Pacific region saw a significant decline of 21% year over year [3] - The Industrial segment reported net sales of $156.3 million, contributing 30.1% of total sales, down 1% year over year [4] - The Process segment's net sales were $120.6 million, accounting for 23.2% of total sales, down 12% year over year [4] - The Contractor segment generated net sales of $242.3 million, contributing 46.7% of total sales, also down 1% year over year [5] Margin and Income 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 increase in gross margin by 0.5 percentage points [6] - Operating income decreased by 10.7% year over year to $145.7 million, with the operating margin declining by 2.1 percentage points [7] Financial Position - As of the end of the third quarter, Graco had cash and cash equivalents of $764.5 million, up from $538 million at the end of 2023 [8] - 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 [8] - Graco paid out dividends totaling $129 million in the first nine months of the year, an increase of 8.7% from the previous year [9] Future Outlook - The company anticipates organic net sales to decline in the low single-digits on a constant-currency basis in 2024 [11] - There has been a downward trend in fresh estimates for the stock, leading to a Zacks Rank of 4 (Sell), indicating expectations of below-average returns in the coming months [12][14]