Graco (NYSE:GGG) Misses Q2 Revenue Estimates

July 23, 2025 at 17:16 PM EDT

GGG Cover Image

Fluid and coating equipment company Graco (NYSE: GGG) missed Wall Street’s revenue expectations in Q2 CY2025 as sales rose 3.4% year on year to $571.8 million. Its non-GAAP profit of $0.75 per share was 4.9% below analysts’ consensus estimates.

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Graco (GGG) Q2 CY2025 Highlights:

Revenue: $571.8 million vs analyst estimates of $590.2 million (3.4% year-on-year growth, 3.1% miss)
Adjusted EPS: $0.75 vs analyst expectations of $0.79 (4.9% miss)
2025 Full-year Guidance: "Component costs have risen due to tariffs...To help offset these higher costs, we will implement a targeted price increase beginning in September. This pricing decision...gives us confidence in our previous guidance for the rest of the year. We are maintaining our 2025 revenue outlook of low single-digit sales growth on an organic constant-currency basis."
Operating Margin: 27.5%, down from 29.2% in the same quarter last year
Market Capitalization: $14.57 billion

Overall sales were up 3% in the quarter despite an organic revenue decline of 3%, primarily due to lower sales in the Contractor segment," said Mark Sheahan, Graco's President and Chief Executive Officer.

Company Overview

Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Graco’s 6.9% annualized revenue growth over the last five years was mediocre. This was below our standard for the industrials sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Graco’s recent performance shows its demand has slowed as its revenue was flat over the last two years. Graco Year-On-Year Revenue Growth

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Contractor and Process, which are 50.5% and 42.4% of revenue. Over the last two years, Graco’s Contractor revenue averaged 1.7% year-on-year growth while its Process revenue (pumps, valves, hoses) averaged 9.6% growth.

This quarter, Graco’s revenue grew by 3.4% year on year to $571.8 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

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Operating Margin

Graco has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 27.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Graco’s operating margin decreased by 1.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

Graco Trailing 12-Month Operating Margin (GAAP)

This quarter, Graco generated an operating margin profit margin of 27.5%, down 1.6 percentage points year on year. Since Graco’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Graco’s EPS grew at a solid 10.8% compounded annual growth rate over the last five years, higher than its 6.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Graco’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Graco has repurchased its stock, shrinking its share count by 1.2%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. Graco Diluted Shares Outstanding

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Graco, its two-year annual EPS declines of 1.4% mark a reversal from its (seemingly) healthy five-year trend. We hope Graco can return to earnings growth in the future.

In Q2, Graco reported EPS at $0.75, down from $0.77 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Graco’s full-year EPS of $2.80 to grow 10%.

Key Takeaways from Graco’s Q2 Results

It was encouraging to see Graco beat analysts’ Process revenue expectations this quarter. On the other hand, its total revenue missed due to shortfalls in the rest of the business, and its EPS also fell short of Wall Street’s estimates. Looking ahead, management stated that "component costs have risen due to tariffs", which is catalyzing a pricing increase. As a result of the price hike, Graco is We are maintaining 2025 revenue outlook of low single-digit sales growth that was previously provided. Still, this quarter could have been better. The stock traded down 3.1% to $84.50 immediately following the results.

Graco didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

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