Graco's Q3 Earnings Surge on Strong Sales, Strategic Acquisitions

TL;DR

**Graco's Q3 is a buy signal: strong earnings, strategic growth, and aggressive buybacks make it a compelling industrial play.**

AI Summary

GRACO INC. reported robust financial performance for the three and nine months ended September 26, 2025. Net sales increased by 4.6% to $543.358 million for the three-month period, up from $519.212 million in the prior year, and grew by 5.0% to $1.643 billion for the nine-month period, compared to $1.564 billion in 2024. Net earnings saw a significant jump of 12.6% to $137.628 million for the quarter, from $122.197 million, and a 3.2% increase to $389.352 million year-to-date. Diluted EPS rose to $0.82 for the quarter and $2.30 year-to-date. The company reclassified its business into three segments: Contractor, Industrial, and Expansion Markets, with Expansion Markets showing the highest operating earnings growth of 42.8% for the quarter to $10.389 million. A notable change was a $14.061 million contingent consideration expense for both periods. Cash and cash equivalents decreased by $56.674 million to $618.662 million, primarily due to $360.952 million in common stock repurchases and $70.107 million for business acquisitions. Goodwill increased by $73.022 million to $560.490 million, largely due to business acquisitions and foreign currency translation.

Why It Matters

Graco's strong sales growth and increased net earnings demonstrate its ability to perform in a competitive industrial market, which is crucial for investor confidence. The strategic reclassification into Contractor, Industrial, and Expansion Markets segments, particularly the significant growth in Expansion Markets, signals a clear focus on high-growth areas and potential future market leadership. However, the substantial share repurchases, while boosting EPS, also led to a decrease in cash, which could impact future liquidity or investment capacity. Competitors in the industrial equipment space will be watching Graco's ability to integrate its acquisitions and sustain growth in these newly defined segments.

Risk Assessment

Risk Level: medium — The company's cash and cash equivalents decreased by $56.674 million to $618.662 million, primarily due to significant common stock repurchases totaling $360.952 million and $70.107 million spent on business acquisitions. While these actions can enhance shareholder value, they also reduce liquidity and increase financial leverage, especially with a $43.956 million increase in goodwill from acquisitions, which carries integration risks.

Analyst Insight

Investors should consider Graco's strong earnings growth and strategic segment focus as positive indicators. However, they should monitor the company's cash flow management, particularly the impact of continued share repurchases and acquisition integration on future liquidity and debt levels. A balanced approach would be to hold, watching for sustained growth in the Expansion Markets segment.

Financial Highlights

debt To Equity

N/A

revenue

$543,358,000

operating Margin

N/A

total Assets

N/A

total Debt

N/A

net Income

$137,628,000

eps

$0.82

gross Margin

N/A

cash Position

$618,662,000

revenue Growth

+4.6%

Revenue Breakdown

Key Numbers

• $543.358M — Net Sales (Q3 2025) (Increased 4.6% from $519.212M in Q3 2024)
• $137.628M — Net Earnings (Q3 2025) (Increased 12.6% from $122.197M in Q3 2024)
• $0.82 — Diluted EPS (Q3 2025) (Increased from $0.71 in Q3 2024)
• $1.643B — Net Sales (YTD 2025) (Increased 5.0% from $1.564B in YTD 2024)
• $389.352M — Net Earnings (YTD 2025) (Increased 3.2% from $377.376M in YTD 2024)
• $360.952M — Common Stock Repurchased (YTD 2025) (Significant increase from $31.350M in YTD 2024)
• $70.107M — Acquisition of Businesses (YTD 2025) (Increased from $7.750M in YTD 2024)
• $560.490M — Goodwill (Sept 26, 2025) (Increased from $487.468M at Dec 27, 2024 due to acquisitions)
• $14.061M — Contingent Consideration Expense (Q3 & YTD 2025) (New expense not present in prior year)
• $618.662M — Cash and Cash Equivalents (Sept 26, 2025) (Decreased from $675.336M at Dec 27, 2024)

Key Players & Entities

• GRACO INC. (company) — registrant
• $543.358 million (dollar_amount) — Net Sales for three months ended September 26, 2025
• $519.212 million (dollar_amount) — Net Sales for three months ended September 27, 2024
• $1.643 billion (dollar_amount) — Net Sales for nine months ended September 26, 2025
• $1.564 billion (dollar_amount) — Net Sales for nine months ended September 27, 2024
• $137.628 million (dollar_amount) — Net Earnings for three months ended September 26, 2025
• $389.352 million (dollar_amount) — Net Earnings for nine months ended September 26, 2025
• $0.82 (dollar_amount) — Diluted EPS for three months ended September 26, 2025
• $360.952 million (dollar_amount) — Common stock repurchased for nine months ended September 26, 2025
• $70.107 million (dollar_amount) — Acquisition of businesses, net of cash acquired for nine months ended September 26, 2025

FAQ

Risk Factors

• Supply Chain Disruptions [medium — operational]: The company relies on a global supply chain for components and raw materials. Disruptions due to geopolitical events, natural disasters, or supplier issues could impact production and lead to increased costs.
• Economic Downturns [medium — market]: Graco's performance is tied to the health of the construction, industrial, and manufacturing sectors. A significant economic slowdown or recession could reduce demand for its products.
• Environmental Regulations [low — regulatory]: Increasingly stringent environmental regulations globally could require significant investments in product development and manufacturing processes to ensure compliance, potentially increasing costs.
• Foreign Currency Fluctuations [low — financial]: As a global company, Graco is exposed to fluctuations in foreign currency exchange rates, which can impact reported earnings and the value of international assets and liabilities.
• Integration of Acquisitions [medium — operational]: The company has a history of acquisitions, including $70.107 million in YTD 2025. Successfully integrating these businesses, including their operations and cultures, is critical to realizing their full potential and avoiding disruption.

Industry Context

Graco operates in markets driven by construction, industrial manufacturing, and maintenance. Key trends include demand for efficient and automated fluid handling solutions, increasing adoption of electric and battery-powered equipment, and a focus on sustainability. The company faces competition from both large, diversified industrial players and smaller, specialized manufacturers.

Regulatory Implications

Graco must comply with various regulations, including environmental standards for emissions and materials, safety regulations for its products, and international trade compliance. Changes in these regulations, particularly concerning environmental impact or product safety, could necessitate costly adjustments to product design or manufacturing processes.

What Investors Should Do

1. Monitor Expansion Markets Segment Growth
2. Analyze Impact of Share Repurchases and Acquisitions
3. Evaluate Contingent Consideration Expense

Key Dates

• 2025-09-26: End of Q3 2025 — Reporting period for the latest financial results, showing increased net sales and net earnings.
• 2024-09-27: End of Q3 2024 — Prior year comparable period for Q3 2025 results.
• 2025-01-01: Reclassification of Business Segments — Company began classifying its business into three reportable segments: Contractor, Industrial, and Expansion Markets, with prior year data recast.
• 2024-12-27: End of Fiscal Year 2024 — Reference point for the prior year's balance sheet, showing total assets and goodwill.

Glossary

Contingent Consideration

An amount of consideration that is dependent on the occurrence of future events. In acquisitions, it's often an earn-out payment tied to the acquired company's future performance. (Graco incurred a $14.061 million expense for contingent consideration in both Q3 and YTD 2025, impacting net earnings.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (Goodwill increased by $73.022 million to $560.490 million, primarily due to business acquisitions and foreign currency translation, indicating strategic growth through M&A.)

Diluted EPS

Earnings per share (EPS) calculated by dividing net income by the weighted-average number of outstanding common shares, including the dilutive effect of stock options and convertible securities. (Diluted EPS increased to $0.82 for Q3 2025, reflecting improved profitability on a per-share basis.)

Reportable Segments

The components of an enterprise about which separate financial information is available and that is utilized by the chief operating decision maker to assess performance and allocate resources. (Graco reorganized into three reportable segments (Contractor, Industrial, Expansion Markets) effective January 1, 2025, with Expansion Markets showing significant growth.)

Year-Over-Year Comparison

Graco Inc. reported a solid increase in net sales for Q3 2025, up 4.6% to $543.358 million, and a more substantial 12.6% rise in net earnings to $137.628 million, leading to higher diluted EPS of $0.82. This performance contrasts with the prior year's results, showing improved profitability. The company also significantly increased its investment in share repurchases and acquisitions compared to the prior year, which contributed to a decrease in cash and an increase in goodwill. A new contingent consideration expense was noted in the current period.

Key Financial Figures

• $1.00 — ich registered Common Stock, par value $1.00 per share GGG The New York Stock Exchan
• $7 million — f intangibles for the third quarter was $7 million in 2025 and $5 million in 2024, and for
• $5 million — hird quarter was $7 million in 2025 and $5 million in 2024, and for the year to date was $
• $14 million — arter of 2025, the Company recognized a $14 million gain from the reduction in fair value o

Filing Documents

• ggg-20250926.htm (10-Q) — 1091KB
• ggg2025q3ex311-quarteronly.htm (EX-31.1) — 11KB
• ggg2025q3ex312-quarteronly.htm (EX-31.2) — 11KB
• ggg2025q3ex32-quarteronly.htm (EX-32) — 7KB
• ggg10222025exhibit991q3.htm (EX-99.1) — 247KB
• image0a02.jpg (GRAPHIC) — 4KB
• image1a02.jpg (GRAPHIC) — 34KB
• 0000042888-25-000047.txt ( ) — 6397KB
• ggg-20250926.xsd (EX-101.SCH) — 28KB
• ggg-20250926_cal.xml (EX-101.CAL) — 80KB
• ggg-20250926_def.xml (EX-101.DEF) — 126KB
• ggg-20250926_lab.xml (EX-101.LAB) — 513KB
• ggg-20250926_pre.xml (EX-101.PRE) — 349KB
• ggg-20250926_htm.xml (XML) — 964KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Consolidated Statements of Earnings 3 Consolidated Statements of Comprehensive Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Consolidated Statements of Shareholders' Equity 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 22

Controls and Procedures

Item 4. Controls and Procedures 22

- OTHER INFORMATION

PART II - OTHER INFORMATION

Risk Factors

Item 1A. Risk Factors 23

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24

Other Information

Item 5. Other Information 25

Exhibits

Item 6. Exhibits 26

SIGNATURES

SIGNATURES 2 Table of Contents

Item 1

PART I Item 1. GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands except per share amounts) Three Months Ended Nine Months Ended September 26, 2025 September 27, 2024 September 26, 2025 September 27, 2024 Net Sales $ 543,358 $ 519,212 $ 1,643,448 $ 1,564,644 Cost of products sold 254,133 243,082 776,960 721,463 Gross Profit 289,225 276,130 866,488 843,181 Product development 20,251 21,306 60,357 65,076 Selling, marketing and distribution 68,019 65,143 203,567 200,773 General and administrative 50,295 43,958 150,407 137,252 Contingent consideration ( 14,061 ) — ( 14,061 ) — Operating Earnings 164,721 145,723 466,218 440,080 Interest expense 711 656 2,079 2,034 Other income, net ( 4,450 ) ( 6,225 ) ( 14,003 ) ( 18,756 ) Earnings Before Income Taxes 168,460 151,292 478,142 456,802 Income taxes 30,832 29,095 88,790 79,426 Net Earnings $ 137,628 $ 122,197 $ 389,352 $ 377,376 Net Earnings per Common Share Basic $ 0.83 $ 0.72 $ 2.34 $ 2.24 Diluted $ 0.82 $ 0.71 $ 2.30 $ 2.19 See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands) Three Months Ended Nine Months Ended September 26, 2025 September 27, 2024 September 26, 2025 September 27, 2024 Net Earnings $ 137,628 $ 122,197 $ 389,352 $ 377,376 Components of other comprehensive income Cumulative translation adjustment 1,501 19,491 78,387 ( 26 ) Pension and postretirement medical liability adjustment 808 ( 268 ) 534 1,954 Income taxes - pension and postretirement medical liability adjustment ( 235 ) 66 ( 178 ) ( 523 ) Other comprehensive income 2,074 19,289 78,743 1,405 Comprehensive Income $ 139,702 $ 141,486 $ 468,095 $ 378,781 See notes to consolidated financial statements. 3 Table of Contents GRACO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) September 26, 2025 December 27, 2024 ASSETS Current Assets Cash and cash equivalents $

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Preparation The consolidated balance sheet of Graco Inc. and subsidiaries (the "Company") as of September 26, 2025 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 26, 2025 and September 27, 2024, and cash flows for the nine months ended September 26, 2025 and September 27, 2024 have been prepared by the Company and have not been audited. In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 26, 2025, and the results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 27, 2024 (the "2024 Annual Report"). The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year presentation. 2. Segment Information Effective January 1, 2025, the Company began to classify its business into three reportable segments: Contractor, Industrial and Expansion Markets. The Industrial segment consists of the newly formed Industrial Division and the Powder Division. The Company's former Industrial and Lubrication Equipment Divisions, along with the Process Transfer Equipment business that was part of the Company's former Process Division, were combined to form the new global Industrial Divisi

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