Graco’s third quarter results showed a modest increase in overall sales, though the company missed Wall Street’s revenue expectations. Management attributed the growth primarily to recent acquisitions, which compensated for continued softness in core organic sales, especially in the Contractor segment. CEO Mark Sheahan described North American construction activity as subdued, citing persistent home affordability issues and cautious customer sentiment. Despite these challenges, Sheahan noted that "expansion markets performed well, led by momentum in the semiconductor space," and highlighted ongoing success in targeted pricing actions to help counter rising tariff costs.
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Graco (GGG) Q3 CY2025 Highlights:
- Revenue: $543.4 million vs analyst estimates of $560.4 million (4.7% year-on-year growth, 3% miss)
- Adjusted EPS: $0.73 vs analyst estimates of $0.74 (in line)
- Adjusted EBITDA: $174.6 million vs analyst estimates of $180.7 million (32.1% margin, 3.4% miss)
- Operating Margin: 30.3%, up from 28.1% in the same quarter last year
- Market Capitalization: $13.49 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Graco’s Q3 Earnings Call
- Deane Dray (RBC): asked about regional and market-specific demand trends and leading indicators. CEO Mark Sheahan described ongoing caution in North America due to tariffs but noted that China was a positive surprise, with stable demand in mining and industrial markets.
- Michael Halloran (Baird): inquired about the drivers of fourth quarter guidance and the sustainability of price-cost normalization. Sheahan clarified that guidance reflects stable demand and incremental benefit from pricing, with no significant improvement in fundamentals assumed for Q4.
- Saree Boroditsky (Jefferies): pressed for details on the company’s ability to implement further price increases in the Contractor segment. Sheahan responded that additional pricing actions are planned for January and are expected to be realized with large channel partners.
- Bryan Blair (Oppenheimer): questioned the impact of the One Graco organizational structure and recent M&A integration. Sheahan and President David Lowe emphasized early margin gains and improved cross-selling due to streamlined operations and better distributor access.
- Matt Summerville (D.A. Davidson): asked about the new product pipeline for Contractor and inventory trends at channel partners. Sheahan confirmed a normal cadence of product launches for 2026 and noted that partners are effectively managing inventory to match current demand.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will be watching (1) the impact of January price increases on margin recovery and tariff cost coverage, (2) the integration progress and market expansion from recent acquisitions such as Color Service, and (3) signs of an uptick in North American construction and remodeling activity. Execution on the One Graco operational strategy and sustained cash flow generation will also be important markers of progress.
Graco currently trades at $81.39, in line with $81.63 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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