Goldman Sachs analyst Joe Ritchie has maintained their neutral stance on GGG stock, giving a Hold rating today.
Joe Ritchie has given his Hold rating due to a combination of factors that suggest a cautious outlook for Graco Inc. (GGG). Graco reported lower than expected sales and segment earnings before interest and taxes (EBIT), with an 8% and 16% shortfall respectively against consensus expectations. This performance reflects a broader trend of weakness across the company’s segments. Ritchie mentions that the Contractor segment, in particular, suffered from a continuous decline in North American construction activity, leading to a 6% drop in sales. Additionally, there was a noted decrease in Process sales across all regions, attributed to weaker semiconductor sales, and Industrial sales were also below expectations, influenced by sluggish economic activity in China.
Looking ahead, despite Graco reaffirming its organic growth guidance for the upcoming fiscal year, the anticipated growth is relatively low and is expected to be primarily driven by the Contractor and US Industrial segments. Ritchie does acknowledge that management remains optimistic about new product introductions and a stabilization of order momentum. However, certain end markets, including semiconductors and industrial sectors in Asia, are projected to stay weak. Ritchie’s neutral stance is further supported by the belief that there are investment options with better risk/reward profiles within his coverage area. Consequently, he has adjusted his estimates for Graco downwards for the years 2024-2026 and set a revised price target that implies modest future cash flow yield expectations.
In another report released today, Robert W. Baird also maintained a Hold rating on the stock with a $87.00 price target.
Based on the recent corporate insider activity of 52 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of GGG in relation to earlier this year.
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Graco (GGG) Company Description:
Graco, Inc. is a manufacturing company, which designs, manufactures and markets systems and equipment used to move, measure, control, dispense and spray fluid and powder materials. It operates through the following segments: Industrial, Contractor and Process. The Industrial segment includes the Applied Fluid Technologies, Industrial Products and Process divisions. It markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil & natural gas, water, wastewater, petroleum, food, lubricants and other fluids. The Contractor segment equipment includes sprayers that apply texture to walls and ceilings, highly viscous coatings to roofs and markings on roads, parking lots, athletic fields and floors. Graco was founded by Russell Gray and Leil Gray in April 1926 and is headquartered in Minneapolis, MN.
