# Graco (GGG)

Sector: Fluid handling equipment

| Field | Value |
|---|---|
| Price | $67.16 |
| Market cap | $11B |
| Intrinsic value source | Analysts |
| Data as of | 2026-10-29 |
| Next earnings | 2027-01-25 (estimate) |

Analysts: Mixed

Picks: Top pick

Discount category: Below intrinsic value

## In short

The market prices Graco for slow organic growth and lower margins from costs and acquisitions, and orders that turn into sales with a recovering margin over the next four to six quarters can close the gap.

## Themes and gap

- Themes: Tariffs and trade (trade-tariffs), Interest rates (interest-rates)
- Gap type: Can close (closable)
- Why: The Q4 2026 report, expected in late January 2027, shows whether higher orders turn into organic sales growth and whether the gross margin stops falling.

## About

Graco designs, makes and sells systems and equipment that move, measure, control, dispense and spray fluids and coatings. Its products include paint sprayers for contractors and home centers, finishing systems for factories, sealant and adhesive dispensers, and equipment for semiconductor and environmental uses. It has three reportable segments: Contractor, Industrial and Expansion Markets. Graco bought Valco Melton, a maker of adhesive application and quality assurance systems, on August 31, 2026. Net sales were $2.24 billion in 2025. Its fiscal year ends in late December, and its headquarters is in Minneapolis, Minnesota.

## Thesis

The market prices Graco for slow organic growth and lower margins. Organic sales fell 6% in Q1 2026 and grew 4% in Q3 2026, so most of the 4% sales growth in the first nine months came from acquisitions. In Q3 2026, the gross margin fell about 3 percentage points because of higher product costs, the lower margins of acquired businesses and an unfavorable mix. The operating margin of the Industrial segment fell to 28% from 34%. Residential construction stayed soft, and Valco Melton had an operating loss in its first month. For the gap to close, three things must be true. Organic orders, which rose 7% in Q3 2026, must turn into organic sales growth in 2027. The gross margin must recover as price increases catch up with product costs. Valco Melton and other recent acquisitions must earn margins closer to the rest of Graco. The Q4 2026 report, expected in late January 2027, is the next test, with fourth quarter sales guidance of $610 million to $640 million. If these checks pass, the gap can close over the next four to six quarters. The main reason it may not close is a longer slowdown in construction and factory spending.

## Checkpoints

- Jan 25, 2027 (estimate): Q4 2026 results: organic growth and margins. Status: Pending. Watch: Q4 sales within $610 million to $640 million, organic growth near the 7% rise in Q3 orders and a gross margin that stops falling pass; lower sales or another margin decline fail.
- 2027 (estimate): Valco Melton margins. Status: Pending. Watch: Valco Melton earns an operating profit in 2027 and Industrial margins recover toward the 34% of Q3 2025 pass; continued losses or a goodwill impairment fail.

## Balance sheet

- Cash: $140M
- Debt: $134M
- Net cash: $6.0M
- Undrawn credit line: $668M
- Debt due within 12 months: $31M

Graco has almost no net debt. At September 25, 2026, cash was $139.8 million, and debt was $134.5 million: notes payable to banks of $30.0 million, current debt of $0.7 million and long-term debt of $103.8 million. Graco had no long-term debt at December 26, 2025. In Q3 2026, it borrowed $219 million under its $750 million revolving credit facility to fund acquisitions and repaid $119 million. Available committed credit was $668 million. In the first nine months of 2026, cash from operations was $463 million, acquisitions used $436 million, share buybacks used $463 million, dividends used $145 million and capital spending was $48 million. Graco expects capital spending of about $80 million in 2026.

As of 2026-09-25.

Sources:

- https://www.sec.gov/Archives/edgar/data/42888/000004288826000145/ggg-20260925.htm
- https://www.sec.gov/Archives/edgar/data/42888/000004288826000145/ggg10212026exhibit991q3.htm

## Dividends

- Dividend yield: 1.8% (last 12 months, at the current price)
- Paid per share, last 12 months: $1.18 (4 payments)
- Current annual rate: $1.18 ($0.295 x 4 a year)
- Payout ratio: 36% of the earnings of the last fiscal year (the year ended 2025-12-26)
- Latest ex-dividend date: 2026-10-19, $0.295 per share
- Growth over the last 5 years: 9.4% a year
- Growth over the last 10 years: 10.4% a year

Dividends per share by year: 2016: $0.44, 2017: $0.48, 2018: $0.532, 2019: $0.64, 2020: $0.70, 2021: $0.752, 2022: $0.84, 2023: $0.94, 2024: $1.02, 2025: $1.10.

Source: company filings and market data, read on 2026-10-29.

## Recent events

- 2026-10-21: Graco reported Q3 2026 results. Net sales rose 8% to $586.4 million, with 4% organic growth and 4% from acquisitions. Operating earnings fell 10% because a gain of $14 million in Q3 2025 did not repeat, and adjusted diluted EPS rose 5% to $0.81. The gross margin fell about 3 percentage points. Organic incoming orders rose 7%. Graco expects Q4 2026 sales of $610 million to $640 million, including Valco Melton. It also licensed its motor technology to ABB for data center cooling equipment.
- 2026-08-31: Graco completed the acquisition of Valco Melton for total cash of about $462 million, subject to adjustments. Graco borrowed $219 million under its $750 million revolving credit facility in Q3 2026 to fund acquisitions.
- 2026-07-22: Graco reported Q2 2026 results. Net sales rose 3% to $590.6 million, mostly from acquisitions, and operating earnings rose 11%, helped by tariff refunds. Graco kept its 2026 guidance for low single-digit organic sales growth at constant currency and mid single-digit growth with acquisitions. It bought back $315 million of shares in the quarter.
- 2026-05-21: Graco agreed to buy Valco Cincinnati, doing business as Valco Melton, a global provider of adhesive application and quality assurance systems.
- 2026-04-22: Graco reported Q1 2026 results. Net sales rose 2% to $540.1 million, as acquisitions and currency offset an organic decline of 6%. Operating earnings fell 4% because of a lower gross margin and higher expenses.
- 2026-03-02: Graco named Sanjiv Gupta, a finance executive of General Motors, as Chief Financial Officer and Treasurer from April 15, 2026. He succeeded David Lowe, who retired.
- 2026-02-20: The U.S. Supreme Court decided that some tariffs under the International Emergency Economic Powers Act were not valid. Graco began to receive refunds in Q2 2026 and received $9 million, net of related surcharges, in the first nine months of 2026.

## Latest news and filings

- Last earnings: 2026-01-26 (8-K: https://www.sec.gov/Archives/edgar/data/42888/000004288826000019/)
- Next earnings: 2027-01-25 (expected; the company has not confirmed it)

| Filed | Form | Headline | Period end | XBRL document | Link |
| --- | --- | --- | --- | --- | --- |
| 2026-10-21 | 10-Q | Quarterly report for the period ended Sep 25, 2026 | 2026-09-25 | ggg-20260925 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000145/ggg-20260925.htm |
| 2026-09-14 | 8-K | Change of directors or officers |  |  | https://www.sec.gov/Archives/edgar/data/42888/000119312526389891/d127483d8k.htm |
| 2026-09-01 | 8-K | Investor disclosure |  |  | https://www.sec.gov/Archives/edgar/data/42888/000119312526377613/d100947d8k.htm |
| 2026-07-22 | 10-Q | Quarterly report for the period ended Jun 26, 2026 | 2026-06-26 | ggg-20260626 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000123/ggg-20260626.htm |
| 2026-06-15 | 8-K | Change of directors or officers |  | ggg-20260612 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000114/ggg-20260612.htm |
| 2026-05-21 | 8-K | Investor disclosure |  | ggg-20260521 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000110/ggg-20260521.htm |
| 2026-05-05 | 8-K | Investor disclosure |  |  | https://www.sec.gov/Archives/edgar/data/42888/000119312526205255/d864524d8k.htm |
| 2026-04-27 | 8-K | Shareholder vote results |  | ggg-20260424 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000101/ggg-20260424.htm |
| 2026-04-22 | 10-Q | Quarterly report for the period ended Mar 27, 2026 | 2026-03-27 | ggg-20260327 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000098/ggg-20260327.htm |
| 2026-01-26 | 8-K | Earnings release |  | ggg-20260126 | https://www.sec.gov/Archives/edgar/data/42888/000004288826000019/ggg-20260126.htm |

Every filing on SEC EDGAR (CIK 42888): https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000042888&type=&dateb=&owner=include&count=40

## Risks

- Medium: Sales depend on construction and factory spending. Residential construction stayed soft in 2026, and organic sales fell 6% in Q1 2026. A longer slowdown can keep organic growth low.
- Medium: Recent acquisitions have lower margins than the rest of Graco. Valco Melton had sales of $12 million and an operating loss of $5 million from August 31 to September 25, 2026. If margins of acquired businesses do not improve, the group margin stays lower.
- Low: Higher product costs and tariffs lowered the gross margin in 2026. Graco must raise prices to offset them, and price increases can lower demand.
- Low: Graco borrowed under its revolving credit facility in 2026 to pay for acquisitions and buybacks. Debt is still small, but more debt-funded deals can raise risk.

## Links

- Page: https://picks.utilarium.app/company/GGG/
- History of changes: https://picks.utilarium.app/company/GGG/history/
- JSON with full history: https://picks.utilarium.app/data/company/GGG.json

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