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Reasons Why You Should Avoid Betting on Graco Stock Right Now
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Graco Inc. (GGG - Free Report) has failed to impress investors with its recent operational performance due to weakness across its businesses and high operational expenses.
Based in Minneapolis, MN, Graco is engaged in designing, manufacturing and marketing equipment and systems to measure, move, control, spray and dispense fluid as well as powder materials. The company offers equipment solutions for tough-to-handle materials with high viscosities and abrasive or corrosive properties.
Let’s discuss the factors that continue taking a toll on the firm.
Factors Affecting Graco
Business Weakness: Graco has been witnessing weakness in the industrial sector. The impact of this slowdown is reflected in the softness of the sealants and adhesives business within the Industrial segment. Also, a decline in demand for semiconductor, industrial lubrication and process transfer equipment products is also hurting the Process segment’s performance. Amid these challenges, its second-quarter revenues declined 1% on a year-over-year basis. For 2024, its organic net sales are projected to decline in the low single-digits on a constant-currency basis.
High Costs & Expenses: The company has been dealing with the adverse impacts of rising costs and expenses. In 2023, Graco’s selling, marketing and distribution costs increased 3.9% from the year-ago period. General and administrative expenses jumped 11.5% in the same period. Operating expenses increased 6% in 2023 due to incremental share-based compensation and increased spending on product development.
The trend continued in the first six months of 2024, with selling, marketing and distribution costs and general and administrative expenses increasing 1.3% and 6.9%, respectively, year over year. The metrics, as a percentage of net sales, increased 70 and 90 basis points year over year, respectively.
GGG Stock’s Price Performance
Image Source: Zacks Investment Research
Over the past six months, the Zacks Rank #4 (Sell) company has lost 9% against the industry’s 1.2% growth.
Forex Woes: With GGG’s operations spread globally, its business is exposed to risks arising from geopolitical issues, adverse movement in foreign currencies and governmental policies. In the first six months of 2024, foreign currency translation had a negative impact of 2% on the Asia Pacific region’s revenues.
Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for Graco’s 2024 earnings has trended down from $3.05 per share to $2.98 on six downward estimate revisions against none upward. The consensus estimate for 2025 earnings decreased from $3.26 per share to $3.15 on six downward estimate revisions versus none upward.
Key Picks
Some better-ranked stocks from the same space are discussed below.
The company delivered a trailing four-quarter average earnings surprise of 11.2%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 2%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%. In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has remained steady.
Flowserve Corporation (FLS - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 18.2%. In the past 60 days, the Zacks Consensus Estimate for FLS’ fiscal 2024 earnings has increased 3.8%.
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Reasons Why You Should Avoid Betting on Graco Stock Right Now
Graco Inc. (GGG - Free Report) has failed to impress investors with its recent operational performance due to weakness across its businesses and high operational expenses.
Based in Minneapolis, MN, Graco is engaged in designing, manufacturing and marketing equipment and systems to measure, move, control, spray and dispense fluid as well as powder materials. The company offers equipment solutions for tough-to-handle materials with high viscosities and abrasive or corrosive properties.
Let’s discuss the factors that continue taking a toll on the firm.
Factors Affecting Graco
Business Weakness: Graco has been witnessing weakness in the industrial sector. The impact of this slowdown is reflected in the softness of the sealants and adhesives business within the Industrial segment. Also, a decline in demand for semiconductor, industrial lubrication and process transfer equipment products is also hurting the Process segment’s performance. Amid these challenges, its second-quarter revenues declined 1% on a year-over-year basis. For 2024, its organic net sales are projected to decline in the low single-digits on a constant-currency basis.
High Costs & Expenses: The company has been dealing with the adverse impacts of rising costs and expenses. In 2023, Graco’s selling, marketing and distribution costs increased 3.9% from the year-ago period. General and administrative expenses jumped 11.5% in the same period. Operating expenses increased 6% in 2023 due to incremental share-based compensation and increased spending on product development.
The trend continued in the first six months of 2024, with selling, marketing and distribution costs and general and administrative expenses increasing 1.3% and 6.9%, respectively, year over year. The metrics, as a percentage of net sales, increased 70 and 90 basis points year over year, respectively.
GGG Stock’s Price Performance
Image Source: Zacks Investment Research
Over the past six months, the Zacks Rank #4 (Sell) company has lost 9% against the industry’s 1.2% growth.
Forex Woes: With GGG’s operations spread globally, its business is exposed to risks arising from geopolitical issues, adverse movement in foreign currencies and governmental policies. In the first six months of 2024, foreign currency translation had a negative impact of 2% on the Asia Pacific region’s revenues.
Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for Graco’s 2024 earnings has trended down from $3.05 per share to $2.98 on six downward estimate revisions against none upward. The consensus estimate for 2025 earnings decreased from $3.26 per share to $3.15 on six downward estimate revisions versus none upward.
Key Picks
Some better-ranked stocks from the same space are discussed below.
Crane Company (CR - Free Report) presently carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company delivered a trailing four-quarter average earnings surprise of 11.2%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 2%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%. In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has remained steady.
Flowserve Corporation (FLS - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 18.2%. In the past 60 days, the Zacks Consensus Estimate for FLS’ fiscal 2024 earnings has increased 3.8%.